Greece avoids downgrade from S&P but risks remain

Greece escaped the threat of an immediate downgrade by Standard & Poor’s yesterday, sending the euro to a session high and helping push US stocks up.

S&P affirmed the debt-ridden country’s BBB+ rating but warned Greece was still at risk of a rating cut within the next 18-24 months if it failed to implement its deficit cutting plan.

“We view the government’s fiscal consolidation program as supportive of the ratings at their current level, hence our rating affirmation,” Standard & Poor’s credit analyst Marko Mrsnik said in a statement.

S&P removed Greece from a negative credit watch, which implied the possibility of a near term cut, but put it on negative outlook, meaning a rating cut was still possible within 18 to 24 months. It had said last month it might cut the rating by up to two notches.

“Despite the new measures, we think it will be difficult for Greece to comply fully with its planned consolidation path, reducing its deficit to 5.6 per cent of gross domestic product in 2011 and 2.8 per cent of GDP in 2012, if it does not implement additional measures in the coming years,” S&P said in the statement.