ATHENS — The Standard and Poor’s rating agency downgraded Greece’s credit grade further into junk status April 15, saying the country’s financial commitments would be unsustainable without “deep economic reform or further relief.”
The agency downgraded Greece to CCC+ from B-, with a negative outlook “given the risk of further worsening in liquidity for the sovereign, the banks, and the economy.”
Greece is in talks with its European creditor states to get the latest loan installment from its bailout program. But the creditors want to see a list of economic reforms first. The two sides are locked on what reforms are suitable.
Amid the uncertainty, investors are getting nervous and there are reports of savers withdrawing money from the banks. Greece’s stock market closed down 1.9 percent on Wednesday.
S&P said Greece’s solvency hinges increasingly on business, financial, and economic conditions.
“In our view, these conditions have worsened due to the uncertainty stemming from the prolonged negotiations between the almost three-month-old Greek government and its official creditors.”
Official figures released April 15 show Greece fell well short of its budget deficit reduction targets last year, a development that’s likely to add pressure on the radical left-led government in its talks with the creditors.
The country’s statistical authority said the 2014 deficit was 3.5 percent of Greece’s annual GDP, considerably higher than the 0.8 percent forecast.
And after stripping out the cost of servicing Greece’s crippling public debt, a modest primary surplus of 0.4 percent was recorded — short of the 2 percent target.
Greece’s future is highly uncertain without more rescue loans. It faces big debt repayments next month and a default could cause it to fall out of the euro.
Standard and Poor’s said the country’s “outlook for full-year economic growth is highly uncertain,” adding that it estimated the economy had contracted by nearly 1 percent during the past six months despite a weaker euro and lower oil prices.
“In our opinion, economic prospects could deteriorate further unless talks between Greece and its creditors conclude soon,” it said.
Greece is unable to tap the international bond market for funds due to sky-high borrowing rates, which reflect a lack of confidence in the country being able to repay its debts.
Authorities are hoping for an agreement with creditors next week, when all 19 finance ministers from the eurozone countries, including Greece’s Yanis Varoufakis, meet on April 24 in the Latvian capital of Riga.
But several European officials have raised doubts about the possibility of a deal then.
Greek Minister of State Alekos Flambouraris said Wednesday that can afford delays of “a week or ten days,” so long as an agreement is eventually struck.
Flambouraris, who is a close adviser to Prime Minister Alexis Tsipras, also claimed that “there is no way” bailout creditors will not budge from their reform demands. He told private Antenna TV that in the case of an impasse Greece could consider a referendum on what to do next.
Elena Becatoros contributed to this report
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