Moody's downgrades Greece

Ratings agency Moody's has downgraded Greece from Ba1 to B1.

A statement from Moody's said: "Moody's Investors Service has today downgraded Greece's government bond ratings to B1 from Ba1, and assigned a negative outlook to the rating."

It added that the country's continuing difficulty on collecting revenue, allied with "ambitious" financial restructuring, plans led to the downgrade.

Moody's now has the lowest rating for Greece of all the major credit agencies and is the first to classify Greek government debt as 'highly speculative'.

The Greek finance ministry said the cut was completely unjustified.

Greece signed in May a 110bn euro (£94.5bn) rescue package with the EU and IMF to avoid default, but many see the repayment terms as too onerous.

Moody's said that Greece continues to face difficulties with revenue collection and there was a risk that the country did not satisfy solvency criteria attached to EU/IMF support after 2013 which could lead to a debt restructuring.

"The fiscal consolidation measures and structural reforms that are needed to stabilise the country's debt metrics remain very ambitious and are subject to significant implementation risks," the agency said in a statement.

Moody's said it was also concerned by the lack of certainty surrounding the nature of financial support that will be available to Greece after 2013, and its implications for bondholders.

"The likelihood of a default or distressed exchange has risen since its last downgrade of the Greek government debt rating in June 2010," the agency said.