Moody's cut Greece's debt to A2 from A1 today over soaring deficits, becoming the third major rating agency to downgrade the highly-indebted country's rating this month.
Moody's kept Greece on a negative outlook.
Its rating is still two notches above that of Fitch and S&P, which earlier this month cut their rating on the indebted country to BBB+, the euro area's lowest level.
"Greece's repositioned rating of A2 balances the Greek government's very limited short-term liquidity risks on the one hand, and its medium- to long-term solvency risks on the other," said Sarah Carlson, Moody's lead sovereign analyst for Greece.
"Moody's notes that the country's longer-term risks have only partly been offset by the government's announced policy response," a Moody's statement said.
The euro trimmed gains against the dollar in response, dipping to around $1.4302 from around $1.4323 before the announcement. It was last at $1.4309, up 0.2 per cent on the day.
Moody's A2 rating does not threaten Greece's access to European Central Bank funds at the end of next year.
But should Moody's downgrade Greece by a further two notches into 'B' territory, as Fitch and S&P have already done, come the end of next year, banks would no longer be able to exchange Greek government debt for cash in ECB refinancing operations.
Greece is set to become the euro zone's most indebted nation in terms of GDP next year, with public debt seen at 121 per cent of GDP. The budget deficit widened to 12.7 per cent of GDP in 2009. The government plans to cut it to 8.7 per cent next year.
Reuters