UPDATE 3-Moody’s may cut Greek credit rating, now on review

* Moody’s says multi-notch downgrade possible

* Will focus on growth, fiscal consolidation, debt dynamics

* S&P also has Greece on review for possible rating cut

(Adds details)

NEW YORK, Dec 16 (BestGrowthStock) – Moody’s Investors Service put
Greece’s credit rating on review for a possible downgrade on
Thursday, citing uncertainty over the country’s ability to cut
debt to sustainable levels.

The decision was made even as the rating firm acknowledged
Greece has made “significant” progress in implementing a large
fiscal consolidation effort.

A multi-notch downgrade could be possible if Moody’s
concludes there is an increased risk the ratio of debt to gross
domestic product will fail to stabilize in three to five years
or that support from the European Union turns out to be less
strong after 2013.

“Therefore, Moody’s review will focus on the factors, namely
nominal growth and fiscal consolidation, that will drive the
country’s debt dynamics over the next few years,” the firm said
in a statement.

Moody’s currently rates Greece at Ba1, the highest junk
status rating and equal to Standard & Poor’s BB-plus rating.
Fitch Ratings remains at investment grade status of BBB-minus.

The Moody’s review was announced as EU leaders gathered in
Brussels for a summit dominated by the search for ways to stop
market contagion engulfing more high-deficit member states.

Greece has suffered a series of downgrades since revealing
last year that its budget deficit was more than twice as big as
forecast, triggering a debt crisis that has sent shockwaves
through global markets.

Its 10-year debt yield (GR10YT=RR: ) fell nearly 3 basis
points on Thursday to bid 12.118 percent as the price rose 0.112
point to 67.743 according to Thomson Reuters Tradeweb.

Moody’s is the second agency to put the debt-choked country
on review for possible downgrade this month, following a similar
move by Standard and Poor’s. [ID:nLDE6B208P]

Fitch is currently reviewing its rating and has said it
would reach a conclusion by the end of the year.


Greece has launched a series of fiscal austerity measures as
part of a 110-billion-euro ($150-billion) EU/International
Monetary Fund bailout agreement that saved it from bankruptcy in

Greek protesters clashed with police and set fire to cars
and a hotel in central Athens on Wednesday while tens of
thousands marched against the reforms and spending cuts aimed at
pulling the country out of its debt crisis.

“The government is clearly very determined to push the
adjustment process forward but it is facing significant
political and administrative headwinds,” said Sarah Carlson,
sovereign credit analyst at Moody’s in London.

Implementation risk is particularly high in 2011, and during
the review Moody’s will be looking at how those risks are being
addressed, the statement said.

The decision to begin the review was also predicated upon
increased uncertainty over debt levels given they were recently
revised substantially higher; a large revenue shortfall in 2010;
and concerns over the level of ongoing support it might receive
if its market access remains cut off.

EU and IMF support remain strong as long as Greece follows
through with its austerity measures, but Moody’s felt there is
also a risk to this view as well.

“The authorities’ willingness and ability to provide Greece
with additional assistance is not assured and particularly
depends on program implementation,” Moody’s said.

“Moreover the precise nature and conditions of support that
will be forthcoming after 2013, and the implications that this
will have for bondholders, is unclear,” the statement said.

A new mechanism for debt agreements would include collective
action clauses (CAC) from 2013, under EU proposals.

CAC’s allow a majority of bond holders to override
objections from minority holders in seeking an agreement on a
debt restructuring.

Asked when Moody’s planned to conclude the review, Carlson
told Reuters: “We want to resolve reviews as quickly as
(Reporting by Daniel Bases and Caryn Trokie; Additional
reporting by Ingrid Melander and Harry Papachristou in Athens;
Editing by James Dalgleish and Hugh Lawson)

UPDATE 3-Moody’s may cut Greek credit rating, now on review