* Greek banks slide after S&P downgrade to BBB+
* Greek 10-yr yield spread over Bunds widens to 263 bps
* Greek 5-yr credit default swaps widen to 251 bps
By George Georgiopoulos
ATHENS, Dec 17 (Reuters) - Greek assets were under pressure again on Thursday after the country suffered its second rating downgrade in a week a day earlier, with investors worried another blow by Moody's may be looming.
Greece, whose budget deficit has soared to 12.7 percent of GDP this year, has no easy way out of its fiscal woes. Pledges of austerity have failed to allay concerns as the country is set to become the euro zone's most indebted economy next year.
Late on Wednesday Standard & Poor's cut Greece's rating by one notch, to BBB+ from A-, saying austerity steps announced by Prime Minister George Papandreou this week were unlikely to produce a sustainable reduction in the debt burden.
"The market is expecting Moody's to proceed with a rating cut, what we don't know is how many notches down (from A1), whether it will take it down to BBB+ as well," said one analyst who declined to be named.
Greek bank shares, which have shed 17.8 percent in the last 30 days, were trimming early losses of 3.9 percent but still underperforming the broader Greek equity market's 1.45 percent slide.
"Bank stocks are losing ground after the S&P rating cut as the country's risk rises ... What worries investors is that the S&P report leaves room for a possible further downgrade," said Takis Zamanis, head trader at Beta Securities.
Greek government bonds were under the hammer again with the yield spread of 10-year government paper over Bunds widening by more than 15 basis points on the day to 262. Greece's 10-year, 6 percent bond was yielding 5.84 percent.
Credit default swaps, another barometer of market sentiment towards Greek debt, widened again on Thursday to 251.8 basis points from 238.7 a day earlier, according to CMA Datavision.
Continuing his fast tour of European capitals to reassure investors and EU partners of the government's plan to tame the deficit, Greek Finance Minister George Papaconstantinou will meet European Central Bank Vice President Lucas Papademos in Frankfurt later on Thursday.
Meanwhile in Greece, striking journalists joined public hospital doctors and communist labour group PAME, giving an early taste of labour discontent over fiscal tightening.
A banner on the entrance of the posh Grande Bretagne hotel in central Athens read "Make the rich pay for the crisis."
With markets speculating Greece might eventually need a bailout from its EU partners, Greece's socialist government, which came to power on Oct 4, maintains it will stick to its plan to bring the deficit back under 3 percent of GDP by 2013.
"What concerned markets most was the timing of the S&P downgrade, soon after the prime minister's anouncements and the finance minister's roadshow in London. It suggests that all those statements did not convince them (S&P)."
(Additional reporting by Harry Papachristou; editing by Stephen Nisbet)