Greece deeper into junk territory as Moody's cuts again

The downgrade places Greece at the very bottom of Moody's league table of credit-worthy European countries.

The news came as officials were desperately trying to secure a second emergency cash injection from the European Union and the International Monetary Fund.

Moody's said it was very concerned about Greece's "highly uncertain growth prospects" and warned that the embattled country is "increasingly likely to fail to stabilise its debt ratios" by the deadline set by its previous €110bn (£96.7bn) bailout.

The three-notch-downgrade takes Greece from B1 to Caa1, giving the country a worse credit rating than Montenegro.

The humbling downgrade came as German ministers were forced to reassure the market that the EU and the IMF were committed to the bailout. Martin Kotthaus, a German finance minister, said: "It was designed jointly. It will be evaluated jointly, and I also assume that it can only be continued jointly, including when it comes to the question of payouts of future tranches."

Greece is due to receive a €12bn injection from Europe and the IMF on June 29 as part of the international bail–out programme. Delivery of the cash is subject to a progress report on asset sales and spending cuts by the international authorities.

Representatives of the "troika" – the EU, IMF and European Central Bank – are in Athens inspecting Greece's assets. Tension is mounting in the markets ahead of their decision – which is expected before the weekend. On Wednesday there were further reports that the IMF will not sanction the next tranche.

Last week, European markets were rattled when Jean–Claude Juncker, who chairs the eurozone finance ministers, said Greece could be disqualified from claiming part of its next cash injection. Mr Juncker, who is also Luxembourg's prime minister, said Greece would be unlikely to guarantee its funding over the next 12 months, preventing the IMF from releasing funds under its own rules.

Greece's commitment to a sale of its assets is key to restoring confidence in the bail-out. Germany's Mr Kotthaus said on Wednesday: "It must be made crystal clear how these privatisation announcements and plans can be executed concretely, tangibly, and comprehensively so that all further delays and such can be avoided."