Greece downgraded by Moody's three notches to way below investment grade; Greece responds by saying your ratings are

Moody's has downgraded Greece three notches from Ba1 to B1, or even deeper in junk(non investment grade) territory. They also assigned a negative outlook for the rating. This dovetails with our original thesis that the Sovereign crisis is not over for Greece, Portugal and Ireland.  The main three reasons that they gave were due to the fact that Greece has not been able to mobilize the country in favor of the reforms needed to escape their debt trap. 

Greek spreads over German are right now flirting with their all time highs.  As soon as we have a drop in the spreads, we slowly inch up back up.  There have been three times when the spreads have dropped from their just-below-10% ceiling.  Now they are approaching again.  What this says is that nothing that Greece has done has inspired long term confidence. 

Currently trades at 9.073
You can see the rational of Moody's:
1.) The fiscal consolidation measures and structural reforms that are needed to stabilise the country's debt metrics remain very ambitious and are subject to significant implementation risks, despite the progress that has been made to date.
The real reason for their lack of reform is the violent protests which seem to be holding the government's hands in many cases.  They have done some reforms, but the amount of people on the street throwing firebombs and maltov cocktails is significant.  In Ireland for example, demonstrations have been small and peaceful.  
2.) The country continues to face considerable difficulties with revenue collection.
This is a reflection of the reality that there is a huge underground economy in Greece that doesn't pay taxes.  In 2006, they estimated that Greece GDP was 25% larger if you count the underground economy
3. ) There is a risk that conditions attached to continuing support from official sources after 2013 will reflect solvency criteria that the country may not satisfy, and result in a restructuring of existing debt.  Moreover, the risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time.

The negative outlook on the B1 rating reflects Moody's view that the country's very large debt burden and the significant implementation risks in its structural reform package both skew risks to the downside.

Greece's country ceilings for bonds and bank deposits are unaffected by today's rating action and remain at Aaa (in line with the Eurozone's rating). Greece's Non Prime (NP) short-term rating is also unaffected by this action.
The Greek government's response was quick and critical. It basically denied that it had ever done anything wrong and that it's downgrade was "completely unjustified".  Then they started ripping into the agencies for past sins.  Their response did have a ring of truth to it, but it seemed more like a government that was in real denial  Via AP:

"Ultimately, Moody's downgrading of Greece's debt reveals more about the misaligned incentives and the lack of accountability of credit rating agencies than the genuine state or prospects of the Greek economy," the finance ministry said.

It said the agencies - rivals Standard & Poor's and Fitch Ratings have also downgraded struggling countries like Greece heavily in past months - were trying to make up for failing to predict the financial crisis.

"Having completely missed the build-up of risk that led to the global financial crisis in 2008, the rating agencies are now competing with each other to be the first to identify risks that will lead to the next crisis," the ministry said.


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