The Market Monitor Minding the Nation's Business
New York—Standard & Poor’s on Wednesday downgraded Greece’s credit rating one notch further into junk territory, saying it’s likely the country will default on its commercial debt within a year if it can’t strike a deal with its creditors.
Greece has shown it is giving higher priority to its pensions and other domestic spending than making debt payments on time, the rating agency said. The country has delayed making a June 5 debt payment to the International Monetary Fund and must pay the lending organization 1.6 billion euros by the end of this month.
S&P lowered Greece’s rating to “CCC” from “CCC+” with a “negative” outlook.
The move reflects “our opinion that in the absence of an agreement between Greece and its official creditors, the Greek government will likely default on its commercial debt within the next 12 months,” the agency said in its report.
The downgrade comes as Greek leaders are locked in negotiations with European officials over the terms of a fresh $8.1 billion (7.2 billion euros) rescue loan. The loan is needed for the country to make payments to the IMF and European creditors.
Yet European leaders said Wednesday that Greece needs to promise greater economic reforms in return for the funds. They are demanding steep cuts to Greece’s pensions, as well as higher sales taxes and larger budget surpluses. AP