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Credit ratings agency Moody's Investors Service said on Wednesday that partial implementation of Greece's budgetary reforms would risk the country's debt being downgraded to Baa1.
In a statement on euro zone peripheral sovereign issuers Spain, Portugal and Greece, Moody's said it was important to restate the case for differentiating the credit profile of the three countries.
Moody's said Greece could face the risk of a "multi-notch downward rating migration" if the debt-stricken nation's public finances remained unsustainable.
"If the implementation falls just short of the execution promised by the Greek authorities, then we may adjust the rating to A3 in the coming months," it said. "However, if only partial implementation is achieved, then we may downgrade Greece's rating to Baa1."
Conversely, the agency said Spain deserved its triple-A rating, while Portugal risked a material chance of a downgrade, but did not envisage Spain's Iberian neighbour facing a "dramatic" rating migration.
Moody's said that if Greece managed to implement most of its budget plans but fell just short of meeting its pledges it could face a rating cut to A3. The Greek/German 10-year bond yield spread widened to 297 basis points from 286 bps after the Moody's comments.
The agency also said there was a very high likelihood of European Union support for Greece if required.
Moody's currently has Greece's long-term debt rating at A2 with a negative outlook, and Portugal's rating on AA2 with a negative outlook.