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China's Dagong downgrades Greece's credit rating

06-03-2011 13:55 BJT

BEIJING, June 3 (Xinhua) -- China's credit rating provider, Dagong Global Credit Rating Co. Ltd., announced Friday that it has adjusted its rating for Greece's local and foreign currency sovereign credit from BB to CCC level.

The rating agency described the country's credit outlook as "negative" for the next two years while also warning of short-term debt default risks.

Dagong said the downgrade reflected the deterioration of the Greek government's debt repayment capability and the difficulty it will have in achieving economic growth in the near future.

Greece faces the long and arduous task of reforming the structure of its economy, Dagong said, adding the nation is unlikely to register economic growth in the short-term.

A decrease in domestic demand in Greece will drag its economy down by 3.6 percent this year, marking the third consecutive year of the country's recession, Dagong said.

The economy won't see growth until 2013, according to the credit rating provider.

It also said that it will be increasingly difficult for Greece to meet its previously announced plan for fiscal budget cuts in 2011 and even more unlikely that it will achieve its fiscal consolidation goals.

Dagong said Greece's debt is building up and is unlikely to stabilize anytime soon.

Greece's debt reached 142.8 percent of its gross domestic product by the end of 2010. The agency predicted that the figure will mushroom to 163 percent in 2015 and then fall slightly to 151.3 percent in 2020.

European officials are rushing to put together their second bailout plan in two years to stave off renewed financial turbulence in the region.

Dagong shed doubts on whether the new rescue plan will be hammered out successfully and take effect. It was also skeptical of Greece's ability to accomplish structural reforms and sell state-owned assets when the new bailout plan is unveiled.

Editor:Wang Xiaomei |Source: Xinhua

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