Dagong also warned that it may downgrade Greece to the lowest default level if austerity further dragged the country downwards.
“Social unrest has intensified. The government’s ability to control economic and social developments has been dramatically impaired,” making the implementation of the EU-IMF aid package difficult, it added.
The ratings agency projects a recession of 7.2 percent in 2012 and 6.8 percent the following year, with very little chances of restoring growth in the medium term.
Neither does the Chinese ratings agency believe that the new €230-billion-strong aid package may “drag the Greek government debt back to a sustainable track.”
While the standing of the Chinese agency has not the same impact on markets as the ‘big three’ Anglo-Saxon ratings agencies – Moody’s, Standard & Poor’s and Fitch – Dagong is indicative of what the Chinese government’s intentions are when it comes to acquiring debt from Greece and other troubled eurozone countries, experts say.
“This downgrade is a confirmation of what we saw in recent weeks: There is no real appetite to invest in Greek bonds – and European bonds in general,” said Carsten Brzeski, a senior economist with ING Bank.
Contrary to what EU officials had alleged earlier this year – that the ‘big three’ are deliberately attacking the sovereign rating of eurozone countries to their own advantage – Brzeski said that the Dagong move illustrates that “Chinese have the same information as all other investors.”
It also spells out clearly that Beijing “is not going to buy Greek debt and play Santa Claus with the eurozone,” he stressed.