Moody΄s Investors Service announced on Tuesday it downgraded the issuer rating of the City of Athens by three notches to B1 from Ba1, with a negative rating outlook.
Moreover, the rating action on Athens reflects the ongoing uncertainties regarding the impact of local government reforms on the city΄s finances and the challenges in adjusting swiftly to what is likely to be reductions in government transfers and service charges given a weakening economy, according to a statement.
“Greek municipalities, including the City of Athens, are unlikely to possess sufficient financial flexibility to enable their credit quality to be stronger than that of the sovereign,” explains Gianfilippo Carboni, an analyst within Moody΄s sub-sovereign group.
The rating agency also recognizes Athens΄ reliance on central government transfers in order to fund its operations and capital investments, and the high level of integration of its local economic base with that of the national economy.
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