Fresh blow for Greece as credit rating is downgraded

THE embattled Greek economy was dealt a further blow yesterday after its credit rating was downgraded.

The news came as eurozone officials agreed the terms of a possible financial rescue for Greece.

Deputy finance ministers and central bankers of the 16 countries sharing the European single currency decided that any emergency loans would be made on terms almost identical to standard IMF bailouts if Greece needed them, an EU source said.

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But the agreement brought only momentary relief on credit markets before the announcement that Fitch Ratings had cut Greece's credit rating to BBB- from BBB+ and signalled that further downgrades are possible, citing intensifying fiscal challenges in the debt-plagued country.

Greece now has the same credit rating as Brazil, Panama, Morocco and Namibia.

New figures published yesterday also highlighted a deepening recession that will further aggravate those problems as the government continued to resist market pressure to seek outside help with its debt crisis.

The Greek government currently plans to fix its finances through austerity measures and borrowing.

But investors say a bail-out is now increasingly likely as the loss of investor confidence on the bond markets this week has increased Greece's cost of borrowing.

Meanwhile, EU newcomer Bulgaria also announced yesterday that it was delaying plans to join the currency after admitting its 2009 deficit figure was wrong.