Fitch Lowers Greece's Ratings, Outlook Negative

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Fitch Ratings on Thursday downgraded Greece's long-term foreign and local currency Issuer Default Rating to 'A minus' from 'A', with a negative outlook. The firm also affirmed the short-term foreign currency IDR at 'F1' and the country ceiling at 'AAA'.

Fitch said the downgrade reflects the announcement made on Wednesday that the country's fiscal deficit could stand at 12.5% of GDP this year, much higher than its earlier forecast of 6%, and above the official projection of 3.7% made in January.

Fitch now projects the general government debt to reach 115% of GDP by the year end, larger than the levels seen in the 1990s. "With the deficit not expected to fall below 9% in 2010, debt is likely to reach around 120% of GDP by end-2010, the highest in the 'A' category", the firm noted. The recent debt projection is also higher than the forecast made in May, when Fitch said the debt would rise to 108.4% by next year end.

Fitch added that the worse outlook for public debt dynamics underline weakness in fiscal reporting and planning and could undermine the credibility of the medium-term fiscal consolidation plans.

(Market News Provided by RTTNews)