Dagong Global Credit Rating Co. Ltd., China's domestic rating agency, on Tuesday downgraded Greece's local and foreign currency sovereign credit rating to C from CCC with a negative outlook.

The rating reflects that Greece's economic and fiscal situation has further deteriorated since June, when Dagong cut the country's rating from BB to CCC, said the agency, adding that Greece's prominent social crisis could lead to serious political unrest.

Meanwhile, the new rescue program proposed by the EU can not effectively recover Greece's solvency in the medium and long term. Since the country has completely lost its solvency, it has to prepare for a massive debt restructuring, Dagong said.

As Greece has fallen into a deep recession caused by dampened domestic demand, Dagong predicted its economy would drop 7.8 percent in 2011, which will be the third straight year of decline and far beyond the government's drop target of 4.8 percent in its Medium-Term Fiscal Strategy.

The agency also predicts an economic decline of 7.2 percent and 6.8 percent in 2012 and 2013, respectively, and that it will be very difficult for the economy to restore positive growth in the medium term.

Furthermore, the deficit ratio of Greece will reach 9.2 percent in 2011, far exceeding the government's target of 7.5 percent. Its deficit ratio will reach 8.5 percent and 7.9 percent in 2012 and 2013, respectively, and remain high in the medium term, Dagong said.

If the debt restructuring by the Greek government is deemed as default by Dagong, it will further downgrade the country's credit rating to the lowest level of D, it added.