Credit rating agency Standard & Poor's cut its rating on Greece to "junk" status on Tuesday, citing a quickly-deteriorating financial situation and a strong possibility that Greece may default on its obligations.
It was the second downgrade of a European country S&P analysts made today, following its downgrade of Portugal earlier in the day.
In a statement, S&P cut its rating on Greece three notches to "BB+" from "BBB+" while keeping a negative outlook on the Athenian nation.
"Our updated assumptions about Greece's economic and fiscal prospects lead us to conclude that the sovereign's credit worthiness is no longer compatible with an investment-grade rating," said S&P credit analyst Marko Mrsnik in a statement.
S&P said its reasoning for the downgrade was partially that Greece's austerity measures may be "too little, too late" and pressures from the nation's influential trade unions may make it difficult to cut anything further.
Greece's debt levels may not recover until 2017, according to S&P estimates, and for this year the government's deficit will reach 13% of GDP - an extremely high level for a euro zone nation.
The euro, which was already down after S&P cut its credit rating on Portugal, slipped even further and was now down 0.9% against the dollar, to $1.3272.
"This is a very, very aggressive move, but the rating agencies are clearly trying to play catch-up after missing the boat on this earlier,"said Win Thin, senior currency strategist with Brown Brothers Harriman.
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