Fitch cuts Greece's rating amid default worries

Ratings firm Fitch cut Greece's credit rating Friday amid worries that the eurozone country is running perilously close to defaulting on its sovereign debt.

Fitch lowered Greece's rating by two notches to the high-risk level of "CCC" from "B," but said that nevertheless it expected the government would survive its cash squeeze.

"Lack of market access, uncertain prospects of timely disbursement from official institutions, and tight liquidity conditions in the domestic banking sector have put extreme pressure on Greek government funding," Fitch said in a statement.

"We expect that the government will survive the current liquidity squeeze without running arrears on debt obligations, but the heightened risks have led us to downgrade the ratings."

The rating downgrade came as the new anti-austerity Greek government raced to reach a deal with its European Union and International Monetary Fund creditors by next month before state coffers run dry.

It is expected to produce a revised reform list Monday in a bid to unblock EU-IMF funds.

In February, after weeks of brinkmanship, Greece won a four-month extension of its rescue, to the end of June, supporting "our base case scenario that Greece and its creditors will ultimately reach a compromise deal," Fitch said.

"However, progress since then has been slow. It is unclear when the earliest disbursement could take place and what will be required for this to happen."

Fitch said the damage from the crisis would take time to repair.

"The damage to investor, consumer and depositor confidence has almost certainly derailed Greece's incipient economic recovery," said the ratings firm.

"Liquidity conditions faced by firms will have worsened substantially, in our view, due to increased government arrears to suppliers and bank funding strains."

Fitch slashed its growth forecast for this year to 0.5 percent, from 1.5 percent projected in January and 2.5 percent in December.