to have been enraged by the downgrade at a time when ordinary citizens are enduring some of the harshest belt-tightening in modern times.

In a statement verging on tirade, the Greek finance ministry hit back, saying the move "reveals more about the misaligned incentives and the lack of accountability of credit-rating agencies than the genuine state or prospects of the Greek economy".

"Having completely missed the build-up of risk that led to the global financial crisis in 2008, the rating agencies are now competing with each other to be the first to identify risks that will lead to the next crisis," it countered.

"At a time when the global economy is fragile and market sentiment is sensitive, unbalanced and unjustified rating decisions such as Moody's today can initiate damaging self-fulfilling propheciesand certainly strengthen the arguments for tighter regulation of the rating agencies themselves," the Greek finance ministry added.

With the country experiencing its worst recession since the second world war, Papandreou is eager to extend the repayment period of the rescue loans beyond their expiry date in 2013, but in recent weeks has met resistance from Germany which is bankrolling much of the package.

Moody's announcement could heighten pressure on eurozone leaders to ease the repayment terms through bond purchases or buy backs.

Since the crisis erupted shortly after the socialists assumed power in October 2009, cuts to wages, pensions and tax hikes have seen the purchasing power of Greeks drop by as much as 20 percent The measures have often been met with street protests and violence.

But the centre-left administration