Jean-Claude Juncker, the head of the Eurogroup of finance ministers, criticised rating agency Moody's today for its 'irrational' downgrade of Greece's debt to 'junk' status.
'I don't understand why this further downgrading did intervene,' Juncker told reporters following a seminar on the European Union in Oslo.
The US-based rating agency slashed its debt rating for Greece by four notches from A3 to Ba1 yesterday evening, saying that even with the help of an EU-IMF bailout package there was considerable uncertainty about Greece would reduce its huge debt and balance its finances.
The downgrade means some investors will no longer be allowed to buy Greek debt under the terms of their investment mandate and could lead to still higher borrowing costs for Athens if it goes to the markets for cash.
'I am totally convinced that a few months from now, the financial markets will see that they were wrong. They are misinterpreting the decisions which have been taken,' Juncker insisted.
'These downgradings of rating are not in each and every case understandable and rational,' he said. 'Personally, I think that financial markets are behaving sometimes in a very irrational way,' he added.
Two other rating agencies, Standard and Poor's and Fitch, had previously downgraded Greek debt to junk status.
Greek bonds face extra 5% charge at ECB
Greek government bonds will attract an extra 5% penalty when banks use them as security for European Central Bank funds, an ECB spokesman said today after Moody's cut the country's debt to junk status.
The extra 'haircut' means commercial banks will receive less money in exchange for Greek bonds than they would if they used government bonds from any other euro zone nation.
'A haircut will be applied, it will be an extra 5%,' an ECB spokesman said.
The ECB has a sliding scale for assessing the riskiness of assets, with sovereign bonds at one end and asset-backed securities at the other.
The ECB said last month it would keep accepting Greek government bonds regardless of their credit rating, but haircuts announced in October 2008 still apply.
