Moody"s warn Greece, Portugal Risk "Slow Death"

Greece and Portugal face a high risk of an economic "slow death", rating firm Moody"s says, as most of the revenues of the two countries go towards paying off their debts.

According to a report by Moody"s Portugal has more time on hand to reverse the trend, but the situation is much worse in Greece.

Last year, Greece had the largest budget deficit in the Eurozone, four times above the 3% of the GDP limit accepted by the EU. On the other hand, according to estimates by the European Commission, this year, Portugal"s debts will reach 85% of the country"s GDP.

"The probability of a sudden death in the form of a balance-of-payments crisis is negligible. The two countries need to implement measures of fiscal consolidation in order to avoid a decline in their debt metrics, which will put pressure on their ratings", the ratings firm"s report shows.

Financial rating agencies Standard & Poor"s, Moody"s and Fitch revised downwards their sovereign ratings for Greece, increasing doubt on the country"s ability to manage its public debt, which is expected to exceed EUR 300 billion in 2010.

• Papandreou: Greece will not leave the Eurozone and will not ask the IMF for help

Greek PM George Papandreou yesterday said that Greece would not leave "under any circumstances" the Eurozone and would not resort to help from the IMF, adding that the state of the public budget that the former government left behind "is beyond belief, with an unprecedented levels of the budget gap and debt".

The Greek government is trying to cut the budget deficit from 12.7% in 2009, to less than 3% by 2013, as required by EU regulations Union.

Yesterday, the experts of the European Commission and of the European Central Bank met with the Greek authorities to discuss the emergency measures that Greece needs to take.

• Greek socialists blame conservatives for the country"s current woes

The Greek socialist government, which came into power at the end of 2009, blames the previous conservative governments (2004-2009) for the economic statistics which the European Commission on Tuesday said were unreliable.

According to European sources, the European Commission will most likely launch the infringement procedure against Greece, because the Greek authorities did not provide trustworthy statistics on the country"s foreign debt and budget deficit.