S&P Lifts Greece’s Credit Rating Out Of Default
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International credit rating agency Standard & Poor’s has upgraded Greece’s credit rating from SD (Selective Default) to CCC, said the Wall Street Journal on Wednesday, with the rating agency declaring the country’s long-term rating outlook to be stable.
International credit rating agency Standard & Poor’s has upgraded Greece’s credit rating from SD (Selective Default) to CCC, said the Wall Street Journal on Wednesday, with the rating agency declaring the country’s long-term rating outlook to be stable.
According to a statement from S&P, the company chose to upgrade Greece’s rating after determining that the reduction, and the improved maturity, of Greece’s sovereign debt had “in our view, alleviated near-term funding pressures,” though they warned that “Greece’s sovereign debt burden (still) remains high.”
The credit rating agency also estimated that Greece’s debt-to-GDP ratios is likely to fall between 160 percent to 170 percent over the next three years, with the country’s economic output to decline by 5 percent this year following a 6.9 percent contraction, in real terms, in 2011.
Consequently, a CCC rating for Greece means that the nation’s debt is still considered as “junk”, with “uncertain economic growth prospects” and weakening political consensus for unpopular reforms unlikely to see another rating increase in the near future.
“The fiscal consolidation under way is largely premised on tax hikes and improved tax collection, an extensive privatization program, and wholesale cuts in government spending,” the agency said.
[quote]“We believe this adjustment has implementation risks given the likely further contraction of the sovereign’s GDP this year and next, which will likely result in persistent social pressures.”[/quote]“The adjustment in our view will be particularly challenging after the upcoming May 6 parliamentary elections,” it added.
Greece’s finance ministry announced its largest ever debt swap on April 25, which wiped off 100 billion euros ($132 billion) from their debt and saw private bondholders take a 75 percent cut from their investments’ real value.
This move came alongside a 130 billion euro ($171 billion) bailout agreement between the Greek government and its official lenders, the European Union and the International Monetary Fund.
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The country will hold national elections this Sunday, whereby the next government is likely to have to take more fiscal measures to meet their debtors’ targets in June.
[quote]”Greece’s strategic course will be determined in these elections, its future for the coming decades,” said the Greek prime minister Lucas Papademos.[/quote]
