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Fitch downgrades Greece

Greek Finance Minister Evangelos Venizelos speaks during a news conference in Athens, Tuesday, Feb. 21, 2012. Greeks greeted uneasily the news on Tuesday that their country will likely avoid defaulting on its debts next month and the euro should remain their currency, but at the cost of years of economic hardship. (AP Photo/Thanassis Stavrakis)

ATHENS, Greece (AP) -- Fitch ratings agency says it has downgraded Greece further into junk status, from 'CCC' to 'C' following the announcement of the details of the country's debt swap deal with private creditors.

The agency said Wednesday the downgrade indicated "that default is highly likely in the near term." In June, the agency had said it would consider Greece to be in restricted default if the bond swap deal went ahead.

The bond swap deal with private creditors will see euro107 billion ($141 billion) of Greece's debt held by banks and other private holders of government bonds written off.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

ATHENS, Greece (AP) -- Greece scrambled Wednesday to adopt a batch of emergency laws that will further cut incomes and government spending, while revising deficit estimates higher, a day after securing a new bailout and debt relief deal designed to stave off bankruptcy.

The new austerity measures demanded by creditors in return for the rescue loans follow two years of deepening misery, with the Greek economy in freefall and unemployment at a record high. Angry unions have called two separate protest rallies outside Parliament in the afternoon.

On Tuesday, the 17-country eurozone approved Greece's second financial lifeline in less than two years, worth euro130 billion ($172 billion), and agreed to impose a euro107 billion ($141 billion) debt writedown on banks and other private holders of Greek bonds.

Without either deal, the country would have defaulted on its debts next month, and would likely have been forced out of the common European currency it joined in 2001. But the price of salvation for ordinary Greeks is only just starting to sink in.

Legislation tabled in Parliament late Tuesday outlines a total euro3.2 billion ($4.2 billion) in extra budget cuts this year agreed by the Cabinet last week.

The measures include nearly euro1 billion ($1.3 billion) in cuts to already depleted pensions. Health and education spending will be reduced by more than euro170 million, while subsidies to the state health care system will be cut by euro500 million. Some euro400 million will be lopped off defense spending — three quarters of which will come from purchases.

The draft law also drastically revises the 2012 budget, changing the deficit target to 6.7 percent of gross domestic product from an initial forecast of 5.4 percent. Even worse, plans for a modest primary surplus — which excludes debt servicing costs — have been scrapped and Greece will instead post a primary deficit of nearly euro500 million, or 0.2 percent of GDP.

Parliament is expected to vote on the cuts and budgetary revisions early next week.

On Wednesday, debate will start at committee level on a separate draft law on adopting the private debt writedown. Parliament's plenary session will vote on the draft law Thursday.

Both pieces of legislation are expected to be approved, as the interim governing coalition headed by technocrat Prime Minister Lucas Papademos controls 193 of the House's 300 seats. But earlier this month the two coalition partners — the majority Socialists and the conservatives — were forced to expel a total 43 deputies who rebelled against new austerity cuts.

Angry unions have called a protest rally against the new belt-tightening for 4:00 p.m. outside Parliament. Communist supporters will hold a separate march an hour later, while other protesters are planning a motorcycle rally. Previous protests have turned violent, and rioters burnt and looted dozens of shops in central Athens during a rally on Feb. 12.

Papademos, who is unelected, has a sole mandate to see through the twin bailout and debt relief deal, and is expected to step down by early April ahead of national elections. Polls show that conservative New Democracy would likely come first, but without a large enough majority to govern alone.