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,”

Standard and Poor downgrades Greek credit rating

  On Tuesday rating agency Standard and Poor revised Greece's credit outlook to negative. The agency said that the debt-ridden country might need even more aid from creditors. The Troika(IMF, European Commission and European Central Bank) has demanded that the country meet its obligations to impose austerity policies before it can receive more money. However, given the economic and political situation this may be impossible.
    In a statement S and P said:. "We are revising the outlook on the long-term ratings on Greece to negative, reflecting the possibility of a downgrade if Greece fails to secure the next disbursement of the EU/IMF Program,"  Greece has made budget cuts but members of the Troika will be returning in September and will decide then if conditions for further aid have been met. After their visit the inspectors said:. "We see the likelihood of shortfalls, owing to election-related delays in the implementation of budgetary consolidation measures for the current year, as well as the worsening trajectory of the Greek economy," The coalition government that won the recent election has been asking for changes and more time to meet the conditions set earlier for aid..
  S and P said that the Greek economy will shrink10 to 11 percent over the 2012-13 period even after a recession that has lasted years. Greek credit is at CCC a speculative rate already.  Fitch rating agency gives Greece the same grade. This is eight levels below investment grade. GDP has shrunk for five years now.Unemployment has risen to 22.5 per cent and is much higher than that among young people. However, the Troika wants Greece to cut even more state jobs to help balance the budget. Creating even more unemployment and fewer jobs is hardly a recipe for generating more revenue that could be used to pay down debt.  Just to tide it through this year Greece may need up to 8.7 billion U.S.  For more see this article.

Standard and Poor raise Philippine Credit Rating

 Rating agency Standard and Poor has raised the Philippine long term debt rating to BB+ from BB. This is the highest rating since 2003. At a time when many countries are receiving lower ratings no doubt President Benigno Aquino is quite happy. In time Aquino hopes the rating will go up one more notch to investment grade.



   A Singapore based S and P analyst said::“The rating action also reflects the country’s strengthening external position, with remittances and an expanding service export sector continuing to drive current- account surpluses.” Aquino intends to spend 16 billion U.S. on roads, bridges, and airports this year so the investment upgrade will help lower borrowing costs.

  The Philippine peso has been strengthening against the U.S. doing the best of 11 major Asian currencies.Moody's has also rated Philippines positively in May. The Philippine economy grew 6.4 per cent in the first quarter of this year. Aquino wants to speed up growth to as much as 8 per cent year to help decrease poverty. For more see this article.

Rating agency S and P puts 15 European countries on credit watch

Rating agency Standard and Poor has put 15 Euro zone countries on review for a possible downgrade of their credit ratings. Even Germany and France could lose their triple A ratings. The move sent Asian stocks into a decline. See this article.

The agency said that there was the risk of a deepening crisis in the region. The agency also cited disagreements among officials and policy makers about how to solve the crisis increases the risks.

Four months earlier S and P cut the U.S. credit rating from AAA to AA+ because of the failure of political discussions on how to tackle the U.S. deficit. Some analysts and bondholders were irritated at the timing of the S and P announcement as European Union leaders have a meeting in Brussels Dec 8th and 9th to deal with the crisis. For much more see this Bloomberg article.