Moody's downgrades Greece

Moody's just cut the credit rating for Greece to Caa3 from Caa2.

"The key driver for today's rating action is Moody's view that the probability of support continuing to be provided over the medium-term has fallen since the assignment of the Caa2 rating in April, regardless of the outcome of Sunday's referendum," the debt ratings agency said.

On Tuesday, Greece failed to make a scheduled debt payment to the IMF, putting the country in arrears. While the event is arguably a default from a normal person's perspective, there are also various technical matters involved before a country can be considered legally in a "default."

"Moody's believes that without ongoing support from official creditors, Greece will default on its privately-held debt," the ratings agency added.

Greek Banks are closed and expected to remain closed through  July 5, when Greek Prime Minister Alexis Tsipras has called for a referendum to vote on the latest terms of a bailout agreement set forth by Greece's creditors.

"While it is not the principal driver of today's downgrade, the announcement of a referendum adds a further, more acute, risk which poses additional risks to private creditors," Moody's added. "The review for further downgrade will assess the implications of the outcome of the referendum for Greece's willingness and ability to reach agreement with its official sector creditors. The negative bias of the review reflects Moody's view that the balance of economic, financial and political risks remains slanted to the downside."

Moody's announcement comes days after S&P's downgrade.

"The review for further downgrade will assess the implications of the outcome of the referendum for Greece's willingness and ability to reach agreement with its official sector creditors," Moody's said.

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