Moody’s cuts Greek credit rating to junk status

ATHENS, Greece – Moody’s Investors Service slashed Greece’s credit rating to junk status on Monday in a new blow to the debt-ridden country that is under intense international scrutiny after narrowly avoiding default last month.

A Moody’s statement said it was cutting Greece’s government bond ratings by four notches to Ba1 from A3, with a stable outlook for the next 12-18 months. It was the second of the three major agencies to accord Greek bonds junk status. Standard & Poor’s did the same in late April.

The downgrades reflect concern that the country could fail to meet its obligations to cut its deficit and pay down its debt – which the Greek government says is out of the question.

In New York, traders initially seemed unfazed, but stocks faltered in the last hour of trading Monday after investors gave in to anxiety about Europe’s economy.

A Greek Finance Ministry statement insisted that the recovery effort was on track.

It said the new cut “does in no way reflect the progress made in recent months, nor the prospects emerging from fiscal improvement and better competitiveness.”

The downgrade came as a delegation from the European Union and the International Monetary Fund started an interim review of the country’s efforts to pull itself out of its major debt crisis.