The move follows Fitch’s downgrade of Spain’s outlook from stable to negative, and S&P’s warning of further downgrades for Portugal’s debt.
"This does paint a rather gloomy outlook for Europe but none of this is a surprise," said AWD Chase de Vere’s Patrick Connolly.
"Problems have been well documented, there’s real doubt about whether Greece can pay off its debt."
Connolly believes there are two ways European investors can react.
"Investors can either say ‘Europe is a trouble spot, let’s avoid it’, or, actually, they can say that negative sentiment can be a great opportunity for investors," he added.
"We have maintained our position in Europe, albeit in companies that get the majority of their earnings from outside the EU."
Greece’s foreign minister reacted furiously to the downgrade, prompting questions about whether the credit rating agency is compounding Greece’s already difficult situation.
The Greek finance ministry issued a statement saying: "The rating downgrade announced by Moody’s today is completely unjustified as it does not reflect an objective and balanced assessment of the conditions Greece is presently facing."
"Furthermore, its timing and the multi-notch nature of the downgrade are incomprehensible."
"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 prophecies and certainly strengthen the arguments for tighter regulation of the rating agencies themselves."
Chris Wise, director at financial adviser Budge and Co, agrees that regulatory intervention can torment struggling economies.
"This goes back to the European Central Bank (ECB) rate rise. For Spain, Portugal and Greece a rate rise and downgrade like this will be stifling and reduce the possibility of growth," he said.
"Downgrades put unnecessary pressure on these economies, creating a vicious circle spiralling towards another recession. The credit rating must reflect what the market is doing."
Performance of index over 3-yrs
Source: Financial Express Analytics
The Citi Greek Government Bond Index – All Maturities has lost investors 6.4 per cent over the last three years. Wise is anxious about investing in economies such as Greece, Spain and Portugal but believes that some investors will look to make gains.
"I don’t think it’s worth investing in a difficult market but then for every seller there is a buyer. People will look to make returns from Greek debt."
"From an investment point of view the downgrade strengthens the argument for looking at countries that are export-led and have a more robust economy," Wise finished.