Fitch slashes Greek bond rating
Only one notch above investment grade
One of the world's biggest bond rating agencies slashed Greece's credit rating Friday.
London-based Fitch Ratings lowered its rating because of mounting concerns about the Greek government's ability to pay back its massive debt.
Fitch lowered its rating by two notches to BBB- and said that its outlook on the country remains negative. That means the agency expects Greek credit worthiness to get worse.
The downgrade means that Greek debt remains investment grade — safe enough for big institutions like pension funds to buy — but only just.
Another drop would mean Greece would have to pay much more in interest. A downgrade would also undermine confidence in the euro.
Greece's Finance Minister George Papaconstantinou attempted to reassure markets Friday, saying key aspects of a previously agreed upon rescue plan by euro currency zone countries and the International Monetary Fund were being hammered out, even as he insisted no bailout was needed.
Fitch said its move reflects "the intensification of fiscal challenges" for Greece following more adverse prospects for economic growth and increased interest costs.
On Thursday, the country's borrowing costs spiked sharply higher as nervous bond investors worried about the possibility of default.
The ratings agency said it's now increasingly difficult for the Greek government to achieve its target of reducing its budget deficit to 8.7 per cent of national income.
Fitch expects the government will have to provide funding to support banks.
Takes swipe at EU partners
Fitch also took a swipe at Greece's partners in the euro currency zone for failing to make clear how willing they are to bail out Greece with a promised loan in conjunction with the International Monetary Fund.
"The agency reiterates the lack of clarity regarding the mechanism for timely external financial support may have hindered Greece's access to market finance at affordable cost and hence further undermined confidence in the capacity of the government to meet its fiscal targets," Fitch said.
With files from The Associated Press