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Agency rates Greece bonds 'junk' Agency rates Greece bonds 'junk'
(21 minutes later)
Greece's debt has been downgraded to junk status by ratings agency Standard & Poor's amid mounting fears its debt crisis is getting out of control. Greece's debt has been downgraded to junk status by Standard & Poor's amid concern it was not able to take steps needed to tackle its economic crisis.
The agency said it was lowering its rating on Greece's debt to BB+ from BBB-, hitting US and European markets. The struggling nation is appealing for 40bn euros from eurozone governments and the IMF to shore up its finances and allow it to make debt repayments.
Earlier, Portugal saw its debt downgraded by two notches as doubt intensified about countries with substantial debt relative to GDP. But there are fears it will not meet conditions needed to access the funds.
Shares in Greek banks slumped by more than 9% on Tuesday. Earlier, Portugal's debt was downgraded as doubts intensified about countries with substantial debt relative to GDP.
These were the banks' largest one-day falls for 18 months as worries grew that financial aid for the country was facing obstacles. S&P said it was lowering its rating on Greece's debt to BB+ from BBB-, hitting US and European markets.
S&P warned holders of Greek debt that they only had an "average chance" of between 30% and 50% of getting their money back in the event of a debt restructuring or default. In London, the FTSE 100 index closed down 2.6% with most of the losses following S&P's downgrade of Greece. On Wall Street, the Dow Jones index was 1.4% lower at 11,052.1 points.
In London, the FTSE 100 index closed down 2.6% with most of the losses following S&P's downgrade of Greece. Shares in Greek banks slumped by more than 9% , the largest one-day fall in bank shares for 18 months.
On Wall Street, the Dow Jones index was 1.4% lower at 11,052.1 points.
'Prohibitive' rates'Prohibitive' rates
On Monday, German Chancellor Angela Merkel had pledged German support to a European financial aid package for Greece, provided "certain conditions" were met.On Monday, German Chancellor Angela Merkel had pledged German support to a European financial aid package for Greece, provided "certain conditions" were met.
She said that Germany would play its part in order to ensure the future stability of the euro but that Greece would have to be ready to accept "tough measures" over several years in return.She said that Germany would play its part in order to ensure the future stability of the euro but that Greece would have to be ready to accept "tough measures" over several years in return.

What went wrong in Greece?

Greece's economic reforms that led to it abandoning the drachma in favour of the euro in 2002 made it easier for the country to borrow money.
Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.
It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
Greece's economic problems meant lenders started charging higher interest rates to lend it money and widespread tax evasion also hit the government's coffers.
There have been demonstrations against the government's austerity measures to deal with its 300bn euro (£267bn) debt, such as cuts to public sector pay.
Now the government has announced that it needs to access the 30bn euros (£26bn) in emergency loans it has been offered by other EU countries.
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What went wrong in Greece?

Greece's economic reforms that led to it abandoning the drachma in favour of the euro in 2002 made it easier for the country to borrow money.
Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.
It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
Greece's economic problems meant lenders started charging higher interest rates to lend it money and widespread tax evasion also hit the government's coffers.
There have been demonstrations against the government's austerity measures to deal with its 300bn euro (£267bn) debt, such as cuts to public sector pay.
Now the government has announced that it needs to access the 30bn euros (£26bn) in emergency loans it has been offered by other EU countries.
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Greece needs to raise 9bn euros ($11.9bn; £7.7bn) by 19 May, but has said it cannot go to the markets because of the "prohibitive" interest rates.Greece needs to raise 9bn euros ($11.9bn; £7.7bn) by 19 May, but has said it cannot go to the markets because of the "prohibitive" interest rates.
The Greek government's cost of borrowing on the money markets has reached record levels in recent days amid investor concern over whether a 40bn euro bail-out package for Greece will be agreed.The Greek government's cost of borrowing on the money markets has reached record levels in recent days amid investor concern over whether a 40bn euro bail-out package for Greece will be agreed.
Eurozone countries, together with the International Monetary Fund, have yet to agree details of the package.Eurozone countries, together with the International Monetary Fund, have yet to agree details of the package.
Investors are also concerned that the Greek government's austerity measures - designed to cut domestic spending and reduce its ballooning budget deficit - will prove too unpopular with the Greek public.Investors are also concerned that the Greek government's austerity measures - designed to cut domestic spending and reduce its ballooning budget deficit - will prove too unpopular with the Greek public.
S&P warned holders of Greek debt that they only had an "average chance" of between 30% and 50% of getting their money back in the event of a debt restructuring or default.
It said its action to cut the rating resulted from its "updated assessment of the political, economic, and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory".