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Greek sovereign debt downgraded again

The Greek government is tonight reeling from yet another credit rating downgrade with Standard and Poors revealing a reduction in the country's rating from A- to BBB+. While the move was expected by many analysts in the debt markets, it came just hours after the Greek authorities tried to steady the market with the revelation that government backed bond issues will resume in January 2010.

It would appear that those in the bond market do not believe that the government is doing enough to cut the growing budget deficit and the large scale sovereign and debt. While the move by Standard and Poors is alarming, the credit rating agency also revealed that Greek sovereign debt still remains on credit watch and could indeed be downgraded again if the government does not respond adequately to the worsening situation.

The situation in Greece is being carefully monitored by other countries around the world with Alistair Darling surely learning a lesson or two from the reaction of credit rating agencies to a very limited budget deficit reduction programme. Even though the UK situation is in no way comparable to the Greek situation, the fundamental fact is that Alistair Darling has yet to give the debt markets a believable and detailed debt reduction plan.

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