Greece’s credit rating cut by Standard & Poor’s as drawn out negotiations between Athens and its creditors further damages Greek economy

This article is more than 5 years old

This article is more than 5 years old

Greece is at substantial risk of a default, one of the world’s three leading ratings agencies said on Wednesday, as it downgraded the debt of the struggling eurozone country.

Standard & Poor’s said the drawn out negotiations between Athens and its creditors were damaging the economy and had resulted in a fresh cut in Greece’s credit rating, which is already at junk-bond status.

“Without deep economic reform or further relief, we expect Greece’s debt and other financial commitments will be unsustainable,” said S&P. It cut Greece’s rating to CCC+/C from B-/B, a level it considers puts the country at “substantial risk” of a default.

Interest rates on two-year Greek bonds stand at almost 24%, an indication that investors expect the country either to have its debt burden eased or to default.

The Syriza-led coalition has been at loggerheads with the so-called Troika of the International Monetary Fund, the European Central Bank and the European Union since coming to power in late January. Athens has been told that unless it submits a revised economic plan to Brussels, eurozone finance ministers may decide not to provide Greece with financial help to pay its debts.

Peter Kazimir, the Slovak finance minister, said he was pessimistic about a deal being done before the eurozone finance ministers meet in Riga a week on Friday.

“Given we have lost a lot of time, I am sceptical,” Kazimir told reporters after a Slovak cabinet meeting, when asked if he believed the Riga gathering could bring a breakthrough. “Greece is moving ever closer to the abyss,” he added.

Comments by Germany’s finance minister, Wolfgang Schäuble, in New York, suggested that the eurozone’s most powerful country intends to take a tough line in the negotiations. Financial markets were not worried about the possibility of a Greek default or departure from the eurozone, and all scenarios were “priced in”, he said.

“You can’t see any contagion in markets,” Schäuble added.