Rating agency downgrades Greek credit even further

Greece's credit grade is already in junk status but on April 15 rating agency Standard and Poor downgraded the status of Greek credit even further.

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Standard and Poor downgraded Greece from a B- rating to CCC+ and even that was with a negative outlook due to "further worsening in liquidity for the sovereign, the banks, and the economy." The agency also warned that Greece's financial commitments would be unsustainable without "deep economic reform or further relief." The rating agency had raised Greek's ratings last year as the economy showed signs of recovery.

There have been constant withdrawals from Greek banks and the Greek stock market declined by almost two percent on Wednesday. Standard and Poor said of the business, financial, and economic conditions in Greece:"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."

New data released on Wednesday showed that Greece fell far short of budget reduction targets in 2014. The predicted deficit for Greece had been 0.8 per cent but in actuality it was 3.5 per cent of GDP. After the cost of interest payments on debt is taken out, the surplus was a mere 0.4 per cent rather than the 2 per cent predicted.

The rating agency estimated that the Greek economy was again contracting over the last six months. The agency also said that the economic situation could worsen if talks between Greece and its creditors do not result in an agreement soon. Greek authorities hope that there will be an agreement when the Eurogroup of finance ministers meet in Riga, Latvia on April 24. If Greece fails to come to an agreement then it could very well run out of cash within a period of weeks without new funds.

European Commission Vice President, Valdis Dombrovskis, who is responsible for the talks said that chances of striking a deal at the upcoming meeting on April 24 are low. He said that the group is more likely to assess progress with a decision on whether to release funds coming at the next meeting of Eurozone Finance Ministers on May 11. A main sticking point is that so far Greece has not agreed to pension and labor market reforms demanded by creditors. Unless more cash is released Greece could run out of funds by May 1. Dombrovskis said of the talks:"Currently, there is some progress but unfortunately those negotiations were in for a slow start, time is short and there is a lot of ground to be covered.”Euclid Tsakalotos, deputy minister for economic relations, claimed that Greece aimed to conclude talks before the April 24th meeting so that a decision could be made tjen:“We are working very hard on the good scenario, and by then, Greece needs to have had some movement on its funding, on the money that is owed to it by the International Monetary Fund (IMF) and the other institutions. We are doing our best to reach a new deal for what we think is good not just for the average Greek but for the average European,”