Fitch became the third rating agency to cut Greek debt to junk, highlighting persisting doubts over the country's ability to pull itself out of a severe debt crisis that has shaken the euro zone.
The agency cut Greece's rating by one notch to BB+ from BBB- and said further cuts could come if the economy did not show sufficient signs of recovery. Greek debt is now rated junk by all three major rating agencies.
The move was announced as euro zone countries struggled to agree on measures to prevent debt jitters from spreading to other peripheral countries in the single currency bloc.
"The downgrade acknowledges that while Greece's economic and fiscal performance under the EU-IMF programme has in many respects exceeded expectations, its heavy public debt burden renders fiscal solvency highly vulnerable to adverse shocks," Fitch said in a statement.
"Despite the significant progress made in reducing the budget deficit in 2010 ... the fiscal consolidation effort will still have to be sustained over several years to firmly anchor confidence in Greek sovereign credit-worthiness," it said.
Fitch senior analyst for Greece Chris Pryce said further cuts could come if the country failed to return to growth by the third quarter of 2011. Plunged into its worst recession in decades, Greece expects the economy to contract by 3 per cent this year but start to grow towards the end of 2011.
"I would hope we would not have to change the rating before the middle of the year, but it could happen if things went badly wrong," Mr Pryce said. "If there isn't a return to growth by the third quarter, we would have to think again about the rating."
He said how Greece meets terms of an EU/IMF €110 billion bailout, as judged in quarterly reviews, and its ability to return to markets or secure further aid would also weigh.
The Greek finance ministry said the downgrade showed the need to revise how rating agencies operate in Europe. A wave of downgrades or warnings on Ireland, Spain and Portugal at the end of last year put pressure on European periphery debt.
"The reforms implemented, those under way and the forthcoming extension of the loan repayment ... all suggest that the rating decision cannot be justified on the basis of objective data for Greece," the ministry said in a statement.
A ministry official said the government had made efforts to stop Fitch from cutting Greece even more.
"Fitch initially planned to downgrade Greece by three notches, but following our objections and a teleconference we had with Fitch, they decided to downgrade by one notch," the official, who requested anonymity, told reporters.
Analysts said the move was expected and unlikely to greatly affect markets.
Fitch acknowledged Greece had made progress under the bailout but said persistent tax evasion put pressure on state revenues. It also cited concerns about public debt sustainability.
It said debt would peak at close to 160 per cent of GDP and new access to market financing remained uncertain. Borrowing costs remain prohibitively high but Greece has said it wants to return to bond markets this year, conditions permitting.