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S&P cuts Greek credit rating by two notches

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by Kay Mitchell
S&P cuts Greek credit rating by two notches

Rating agency Standard & Poor’s (S&P) has today downgraded Greece’s credit rating by two levels from BB- to B – the fourth cut by S&P since April 2010.

The yield on Greek 10-year bonds surged to 15.7% - more than double the level of a year ago when the country was forced to accept an international bailout.

The downgrade comes just a few days after a meeting of euro zone finance ministers suggested that the crisis-torn economy may need further financial help in order to avert a debt restructure.

Greece, which is considered to be one of the weaker nations of the euro zone, received an €110,000 bailout last year in return for agreeing to reduce public spending to trim the deficit.

Greece is aiming to reduce its deficit to 7.4% of GDP by the end of 2011 and has pledged to get the deficit below 3% by 2014 – in accordance with EU rules.

Meanwhile, fellow ratings agency Moody’s said today it review its B1 rating for Greece for a possible downgrade.

The news sent shares down with France’s Cac 40 index closing down 1.3%, while Germany’s Dax lost 1.1%.

Meanwhile, in response to S&P’s downgrade, Greece’s Finance Ministry said the decision was not justified and refuted claims that Greece would restructure its debt.

A review of Greece’s progress will commence this week and the EU and IMF will decide whether the country will receive the next instalment under the terms of its bailout.

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News posted: May 10, 2011

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