Moody’s Investors Services has downgraded Greece’s government bond rating from Caa2 to Caa3 and placed the rating on review for a further downgrade.
The move is based on the view that “the probability of support continuing to be provided over the medium-term has fallen since the assignment of the Caa2 rating in April, regardless of the outcome of Sunday’s referendum”.
The ratings agency added: “If Greece is to continue to service its official and private sector obligations over the coming years, it needs to reach a lasting agreement with its official creditors.
“However, even if such an agreement can be reached, it will face high, ongoing implementation risks given political and social discontent in Greece and its weak institutions, which have hampered implementation of agreed measures to date.”
Moody’s added that the review for a further downgrade will assess the implications of the outcome of the referendum “for Greece’s willingness and ability to reach agreement with its official sector creditors”.
It added the negative bias of the review reflects Moody’s view that “the balance of economic, financial and political risks remain slanted to the downside”.