ATHENS, Greece -- Moody's ratings agency downgraded eight Greek banks by two notches Friday due to their exposure to Greek government bonds and the deteriorating economic situation in the debt-ridden country, whose government has struggled to meet the terms of an international bailout.
Moody's Investors Service downgraded
National Bank of Greece
EFG Eurobank Ergasias
Agricultural Bank of Greece
to CAA2 from B3. It also downgraded
Emporiki Bank of Greece
General Bank of Greece
to B3 from B1.
The agency said the outlook for all the banks' long-term deposit and debt ratings was negative.
Moody's cited "the expected impact of the deteriorating domestic economic environment on non-performing loans" and "declines in deposit bases and still fragile liquidity positions" in its reasoning for the downgrade.
Greece has angered its international creditors by lagging behind in its commitments to implementing reforms and carrying out pledges it has made to secure funds from its €110 billion ($149 billion) bailout from other eurozone countries and the International Monetary Fund.
In a rush to secure the disbursement of the vital next batch of loans, worth €8 billion, and heading toward a fourth year of recession, the government this week announced another round of tax hikes and pension cuts, angering an already austerity-weary public which has responded with strikes.
Public transport workers and taxi drivers are expected to hold a 48-hour strike next week that will leave Athens without any form of public transport, while air traffic controllers have declared a 24-hour strike this Sunday. A nationwide general strike is set for Oct. 19.
Debt inspectors from the IMF, European Central Bank and European Commission, collectively known as the troika, are due back in Athens next week to complete their review of Greece's progress and make a recommendation on whether it should receive the next loan installment. Without it, Greece will run out of cash in mid-October.
Moody's said that despite its downgrade, it "recognized the continued potential for the Troika to extend systemic support to the Greek banks in case of need," as well as the potential of a Greek financial stability fund to do the same.