Moody's smaller than expected downgrade of Greece's credit rating shows that markets are starting to believe the government's efforts to contain the budget deficit, Greek Finance Minister George Papaconstantinou told CNBC Tuesday.
"This is an indication that we are beginning to rebuild the confidence that we need to convince markets and our European partners that we are moving in direction of reducing the deficit and controlling debt," George Papaconstantinou told CNBC.
The ratings agency cut Greece's debt to A2 from A1, sparking a rally in its bonds. Although Moody's is the third ratings agency to downgrade the country’s debt, its ratings are still 2 notches above those of Fitch and S&P.
But Moody's has kept Greece on a negative outlook saying in a statement that the "country's longer-term outlook has only partly been offset by the government's policy response."
"We have been arguing and explaining to all ratings agencies and investors what we are trying to do to show not only our short-term program to reduce the deficit but also our medium-term program which proposes significant reforms in our tax system, public management, pension system that will produce long-lasting effects," Papaconstantinou said.
"The truth of the matter is that what has been coming out is simply bad news about the numbers but what is less visible is what we are doing about it and we are doing a lot."
Despite ongoing concerns about Greece's budget deficit, Papaconstantinou believes the main problem is more the credibility issue.
“In 2010 Greece will be doing the biggest correction in its deficit than any other country. Ireland's will be going up so will the UK's, France's and Germany's. But we are reducing ours by 4 percentage points. But up until now people aren't believing we are willing and able to do it," he said.
Hopefully, the government will be changing that perception and will prove during the course of the year that it is willing and able to do it, Papaconstantinou added.