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Question of the Day
The debt crisis has taken a major toll on the common currency, the euro, as well as European stock and bond markets this year. A brief respite from the turmoil on Monday got threatened by yet another downgrade of beleaguered Greece, whose enormous debt problems triggered the crisis.
Moody’s Investors Service followed Standard & Poor’s Corp. in dropping Greece’s credit rating to junk levels — which means that mutual funds and other major investors can no longer buy the country’s bonds.
Despite the dramatic four-notch downgrade, Moody’s Vice President Sarah Carlson said she still expects Greece to avoid a default on its debts if it follows the economic reform plan laid out by the government and uses the backup loans provided by the EU.
But she said Moody’s is more concerned than before that Greece’s best efforts could be defeated either by a renewed downturn in the economy or by public rejection of critical reforms. Greece’s powerful labor unions have persistently protested the wage curbs and budget cuts announced by the government.
Despite the grim outlook for Greece, David Beers, the head of sovereign ratings at S&P, said a Greek default is not “inevitable,” as many investors now appear to think.
“If S&P shared that degree of pessimism, our ratings of the eurozone would be uniformly much lower than they are right now,” he told a Reuters conference. “Greece has the space and time to show the market and also its own people that it is implementing a plan.”
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