Fitch Ratings-London-22 October 2009: Fitch Ratings has today downgraded Greece's Long-term foreign currency and local currency Issuer Default Ratings (IDR) to 'A-' from 'A'. The Outlook is Negative. The Short-term foreign currency (IDR) is affirmed at 'F1' and the Country Ceiling at 'AAA', in line with the common country ceiling for euro area sovereigns.
The downgrade reflects the announcement yesterday that Greece's fiscal deficit in 2009 is likely to be 12.5% of GDP, far higher than Fitch's previous expectation of 6% and compared to Greece's official projection of 3.7% in the January 2009 Stability and Growth Programme Update. Fitch now expects general government debt to reach around 115% of GDP by end-2009, higher than levels seen in the mid-1990s. With the deficit not expected to fall below 9% in 2010, debt is likely to reach around 120% of GDP by end-2010, the highest in the 'A' category. Fitch's last review of Greece's ratings in May 2009 anticipated government debt rising to 108.4% by end-2010.

In addition to the much worse outlook for public debt dynamics, the scale of the revisions to both 2009 and 2008 - where final figures for 2008 show a deficit of 7.7% of GDP compared to the government's initial 2008 estimate of 3.7% made in January 2009 - underline weaknesses in fiscal reporting and planning. These ongoing deficiencies materially undermine the credibility of medium-term fiscal consolidation plans.