Greek gov't vows to improve public finances after credit rating downgrading

ATHENS, Dec. 8 (Xinhua) -- The newly elected Greek government pledged Tuesday to take necessary measures to improve public finances, following the downgrading of its credit rating by the Fitch rating agency.

"We will do what is necessary to meet our obligations," said Finance Minister George Papaconstantinou.

Fitch downgraded Greece's credit rating from A- to BBB+ on Tuesday. It was the first such downgrading in 10 years and the first time the country's rating had been designated as under "A" by an international credit ratings firm.

"The downgrade reflects concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece, exacerbated by uncertainty over the prospects for a balanced and sustained economic recovery," said Fitch in a statement.

The rating agency gave Greece the worst mark in the euro zone, fuelling fears for the future of the Greek economy and serious consequences at international level.

To calm down citizens and investors, Papaconstantinou said, "We will do what we need to be consistent in our medium-term obligations in 2010. The current government pays the lack of credibility of the previous government. We do not face a problem in getting loans. We just need to persuade markets, as we did with the citizens."

After two separate meetings with Prime Minister George Papandreou and Greek central bank governor George Provopoulos, Papaconstantinou said, "we shouldn't terrorize the world," denying scenarios on freezing or reducing wages and pensions.

The minister supported the newly elected socialist government's choice to move on to spending cuts and a war on tax evaders. According to Fitch, these moves will dent the ballooning public debt.

Provopoulos downplayed concerns on the domestic banking system after Fitch cut the ratings of five Greek commercial banks.

Moody's and Standard & Poor's also have announced negative credit outlook for Greece recently, mostly because of its expanding debt. The European Commission has threatened sanctions unless Athens takes more deficit-cutting measures in the following weeks.

European Union's outgoing Economic and Monetary Affairs Commissioner Joaquin Almunia warned of impacts beyond Greek borders.

"We take note of the fact that the sustainability of public finances in Greece draws the attention of financial markets and rating agencies," Almunia said in a statement. "A difficult situation in one euro area member state is a matter of common concern for the euro area as a whole."