S&P downgrades Greece
February 6, 2015
Standard & Poor's (S&P) announced Friday that Greece's sovereign debt rating would be lowered from B to B- and the struggling eurozone country's creditworthiness kept on "negative" watch.
The agency said it believed Greece's limited cash buffers and approaching debt redemptions to creditors "constrain its negotiating flexibility" and would "narrowe the timeframe during which Greece's new government can reach an agreement."
"We believe the potential uncertainties surrounding the timing and success of such an agreement risk exacerbating deposit outflows, depressing investment, and weakening tax compliance," it added.
The European Central Bank (ECB) decided this week to bar Greek banks from using Greek government bonds as collateral to borrow from the ECB while there is no prospect of an agreed bailout program.
Greece's new leftist prime minister Alexis Tsipras was elected in January on a promise to scrap unpopular austerity measures imposed under a 240-billion euro ($270-billion) international bailout and write off a chunk of the country's debt.
During a tour of European capitals this week he sought to drum up support for debt forgiveness plan, but his government seemed isolated in the eurozone.
S&P also said that the debt-laden eurozone country's long and short-term ratings remained on "negative" credit watch, meaning they could be lowered again. The agency warned that drawn out talks with creditors could lead to a "worst-case scenario," with a need to impose capital controls and a loss of access to "lender-of-last-resort financing." This had the potential to result in "Greece's exclusion from the Economic and Monetary Union."
uhe/nz (Reuters, dpa)