Moody's Investors Service on Friday cut the credit ratings of Greece, saying that the recently announced debt-exchange proposals for the country imply expected losses to investors of more than 70 percent.

Moody's downgraded Greece's local- and foreign-currency bond ratings to C from Ca. This is the lowest credit rating level on its bond scale.

[T]he announced proposal for private-sector involvement, which is a precondition for the provision of further financial assistance from the euro area, would constitute a distressed exchange, and hence a default, on Greek government bonds, Moody's said. The credit-rating agency added that the risk of default would remain high if and when the proposed debt exchange has been completed.

Earlier, euro-zone finance ministers approved a 130 billion euro ($171 billion) bailout package to Greece. However, many experts believe this will not be good enough to solve the crisis faced by the country.

Nearly 100 billion euros of debt has been written down, and private-sector holders of Greek debt are expected to take losses of 53.5 percent or more on the nominal value of their bonds.

Now in its fifth year of economic recession, Greece reported its gross domestic product fell 6.8 percent in 2011. The country's unemployment rate is 21 percent, and the future looks extremely gloomy.

Last month, the Greek parliament approved austerity and debt-relief measures that the country's emergency-lending troika -- the European Union, the European Central Bank, and the International Monetary Fund -- had demanded as a prerequisite for more loans, making their approval essential for Greece to avert bankruptcy.

Subsequently, riots flared in the capital of Athens and other Greek cities, with thousands joining the protest rallies. Such tensions could flare again as the Greek government implements the recently passed cost-cutting measures.

Doubts surround the question of whether deep spending cuts can possibly enable Greece to ease its staggering debt load. Many economists consider austerity measures a recipe for slow growth and high unemployment, which in turn adds to the burden on private holders of the country's debt.