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Moody's Says Greek Default Still Possible

Moody'sWhile Prime Minister Antonis Samaras said Greece has escaped the prospect of leaving the Eurozone, a default remains possible, according to Moody’s, with the international rating agency expecting the country’s economy to contract by 5 percent this year – against a government forecast of 4.5 percent – and for the recession to continue for a seventh yer into 2014, too.
Finance Minister Yiannis Stournaras earlier this month guaranteed the recession would not go past the end of the year and said the economy will show recovery by then and even modest growth next year, although that assessment is at odds with many analysts who think Greece will be saddled with debt and doubt for years.
In its analysis on Greece, Moody’s argued that the risks that could sink the country’s economy and therefore its credit rating are still existent. These include the risks in the implementation of the second bailout program, exceptionally uncertain growth prospects, the political and social challenges the Greek economy is facing and the fact that the country’s debt is still considered unsustainable. Even Stournaras acknowledged that protests and riots could jeopardize the tenuous standing of the coalition government.
Although Moody’s acknowledges the improvement in the liquidity of the Greek economy, the banks’ entry into the recapitalization process and the government’s efforts to proceed with reforms, it concludes that the fragile social stability and the coalition government’s challenges could still see the country go bankrupt.
On the other hand, the head of the European Council, Herman Van Rompuy, added his voice to that of various European politicians in the last few weeks who have been expressing their optimism on Greece, saying that “the worst is behind us.”

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