Greece stymied as S&P downgrades credit worthiness

GREECE took another hammering yesterday after Standard & Poor’s downgraded the troubled country’s long-term credit rating, after its prime minister warned more cuts were likely to reduce its huge fiscal deficit.

The credit rating agency notched down the Hellenic Republic’s sovereign grade to BBB+ from its previous A-, matching Fitch Ratings’ cut, with Moody’s Investors Service placing the country three grades higher at A1.

Greek Prime Minister George Papandreou on Monday pledged to cut the government’s deficit from nearly 13 per cent of GDP to three per cent in four years.

In a statement S&P said: “The downgrade reflects our opinion that the measures the Greek authorities have recently announced to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden.”

S&P added: “Moreover, we believe that the government’s efforts to reform the public finances face domestic obstacles that would likely require sustained efforts over a number of years to overcome.”

The ratings agency also fuelled speculation that further downgrades were on the cards as it kept Greece’s CreditWatch on negative status.

Gary Jenkins at Evolution Securities in London said: “They put [Greece] on watch on 7 December and said the watch listing would be resolved within 60 days, well clearly it couldn’t have been a very difficult decision because it only took them nine days.”