S&P cuts Greece rating on referendum call

AFP, WASHINGTON: Standard & Poor’s downgraded Greece’s credit rating deeper into junk territory on Monday, saying the government’s call for a referendum on creditor proposals brought it closer to default.
“We interpret Greece’s decision to hold a referendum on official creditors’ loan proposals as a further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership,” said S&P.
It cut Greece’s already deeply junk-level rating to ‘CCC-‘ from ‘CCC’.
The Greek government announced on Saturday that it would hold a referendum on July 5 on proposals from its official creditors—the European Commission, the European Central Bank and the International Monetary Fund—effectively breaking off negotiations to obtain another 7.2 billion euros ($8.1 billion) in
bailout funds.
S&P said that was a sign that Athens would likely miss its payment obligations due the same day, June 30, including the 1.5 billion euros ($1.7 billion) to the IMF.
A missed payment to the IMF, or to the ECB, would not be a commercial default, the ratings firm noted.
However, given the country’s dire finances and absent unforeseeable improvements in the situation, “a commercial default is inevitable within the next six months,” the ratings firm said.
In a one-notch rating downgrade earlier in June, S&P saw the likelihood of a commercial default within the next 12 months.
According to S&P estimates, about 39 billion euros of Greece’s medium- and long-term debt is commercial, while all of the remaining 261 billion euros in debt, excluding 15 billion euros in Treasury bills, is owed to official creditors.
With the crisis building, Greece on Monday ordered its banks shuttered until July 6, and placed controls on capital to stanch market panic.
But S&P said that will further drag down economic growth, predicting a 3.0 per cent contraction this year after 0.8 per cent growth in 2014.
It also made more likely the country’s leaving the eurozone.
“Given that the government appears willing to accept the consequences on its banking sector and economy from the failure to reach an agreement, we now see a 50 per cent likelihood of Greece eventually exiting the eurozone,” it said.
The EU’s financial support to Greek banks now exceeds roughly 70 per cent of the country’s economy, the ratings firm said.

S&P cuts Greece rating on referendum call

AFP, WASHINGTON: Standard Poors downgraded Greeces credit rating deeper into junk territory on Monday, saying the governments call for a referendum on creditor proposals brought it closer to default. We interpret Greeces decision to hold a referendum on official creditors loan proposals as a further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership, said SP. It cut Greeces already deeply junk-level rating to CCC- from CCC. The Greek government announced on Saturday that it would hold a referendum on July 5 on proposals from its official creditorsthe European Commission, the European Central Bank and the International Monetary Fundeffectively breaking off negotiations to obtain another 7.2 billion euros ($8.1 billion) in bailout funds. SP said that was a sign that Athens would likely miss its payment obligations due the same day, June 30, including the 1.5 billion euros ($1.7 billion) to the IMF. A missed payment to the IMF, or to the ECB, would not be a commercial default, the ratings firm noted. However, given the countrys dire finances and absent unforeseeable improvements in the situation, a commercial default is inevitable within the next six months, the ratings firm said. In a one-notch rating downgrade earlier in June, SP saw the likelihood of a commercial default within the next 12 months. According to SP estimates, about 39 billion euros of Greeces medium- and long-term debt is commercial, while all of the remaining 261 billion euros in debt, excluding 15 billion euros in Treasury bills, is owed to official creditors. With the crisis building, Greece on Monday ordered its banks shuttered until July 6, and placed controls on capital to stanch market panic. But SP said that will further drag down economic growth, predicting a 3.0 per cent contraction this year after 0.8 per cent growth in 2014. It also made more likely the countrys leaving the eurozone. Given that the government appears willing to accept the consequences on its banking sector and economy from the failure to reach an agreement, we now see a 50 per cent likelihood of Greece eventually exiting the eurozone, it said. The EUs financial support to Greek banks now exceeds roughly 70 per cent of the countrys economy, the ratings firm said.