Ratings agency Moody's downgraded Greece to the lowest point on its bond scale, following a deal with private investors that would see them ultimately lose 70% of their holdings in the country's debt.

Moody's lowered Greece's sovereign rating to C from Ca last night, arguing that the risk of default remains high even if a bond-swap deal with banks and other private investors, due to be completed this month, is successful.

Standard & Poor's took similar action on February 27.

Moody's said it would "reassess the credit risk profile" after Greece issued the new bonds.

The swap deal aims to cut 107 billion euros from the country's debt and would see private investors lose more than half the face value of their Greek bonds in exchange for new ones issued with more favourable repayment terms for the crisis-hit country.

The exchange is an integral part of a second bailout package for Greece by other eurozone countries and the International Monetary Fund.

"Looking ahead, the EU programme and proposed debt exchanges will reduce Greece's debt burden, but the risk of a default even after the debt exchange has been completed remains high," Moody's said.

"Moody's believes that Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100% of gross domestic product for many years, the country is unlikely to be able to access the private market once the second assistance package runs out, and its planned fiscal and economic reforms will still face very significant implementation risks."

Greece has been relying since May 2010 on rescue loans from eurozone partners and the International Monetary Fund. But despite receiving 73 billion euros from its initial 110 billion-euro bailout and pushing through tough austerity measures in return, the country has consistently missed its reform targets.

To limit a threat to Europe's single currency, its leaders have agreed to extend the country a second bailout, this time worth 130 billion euros, which is accompanied by the debt reduction deal.

So far, the eurozone has agreed in principle to release the first batch of bailout loans to Greece to finance the bond-swap, with the final green light to due till come next week.

But harsh austerity has pushed the country into a fifth year of recession and seen the unemployment rate reach nearly 21%.

Earlier yesterday, provisional figures from the finance ministry figures showed Greece posting a deficit in January of 490 million euros, in contrast to last year's equivalent surplus of 154 million euros.

The ministry's General Accounting Office said revenues during the month were hit by the expiry of a one-off business tax, as well as reduced revenues from consumption.

Revenues in January totalled 4.87 billion euros. Though a little bit better than the government's latest target, it is markedly worse than last year's equivalent of 5.12 billion euros.