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Announcement:

Moody's: Investor Fears Over Greek Government Liquidity Misplaced

Global Credit Research - 02 Dec 2009

Risk lies with long-term solvency, not short-term liquidity

London, 02 December 2009 -- Investors' fears that the Greek government may be exposed to a liquidity crisis in the short term are misplaced, says Moody's Investors Service in a new report, "Investor Fears of Liquidity Crisis in Greece are Overdone." The rating agency, which had placed the country's sovereign rating under review for possible downgrade in late October, says that its concerns are related to the erosion of the economy's potential over the long term, not to short-term liquidity risks.

"Indeed, the risk that the Greek government cannot roll over its existing debt or finance its deficit over the next few years is not materially different from that faced by several other euro area member states," explains Arnaud Marès, a Senior Vice President in Moody's Sovereign Risk Group.

"The eligibility of Greek government bonds for use as collateral in ECB operations means that there is an extremely low probability that the government's liquidity will pressured," says Mr. Marès. Only if Greek government debt became ineligible for these purposes, either from the ECB tightening its eligibility criteria or from Greece's sovereign rating falling by several notches, or a combination of both, would liquidity risk be material. Besides, Marès points out, this risk would materialise in the medium to long term, not in the short term.

However, Moody's continues to be concerned that a longer-term erosion in Greece's economic growth potential will translate into an inevitable deterioration of its creditworthiness. "In the absence of significant economic and fiscal reforms, the interests of the government's creditors and those of other stakeholders would likely come into conflict with increasing frequency," indicates Sarah Carlson, a Vice President-Senior Analyst in Moody's Sovereign Risk Group. "Given the nature of the political economy in Greece, it is not a foregone conclusion that any such tensions would be resolved to the benefit of debt holders." These concerns will be addressed in the context of the ongoing review of Greece's sovereign ratings.

Moody's placed Greece's A1 long-term foreign and local currency ratings on review for possible downgrade on 29 October 2009. Moody's expects to complete its review in late 2009 or early 2010.

* * * * *

NOTE TO JOURNALISTS ONLY: For a copy of this report, please contact EMEA Press Information in London +44-20-7772-5456; New York Press Information +1-212-553-0376; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +33-1-5330-1020; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7-495-228-60-60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Claassen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 401 9536; or visit our web site at www.moodys.com

London
Arnaud Mares
Senior Vice President
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Sarah Carlson
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: Investor Fears Over Greek Government Liquidity Misplaced
No Related Data.

 

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