Standard & Poor's Ratings Services said on Wednesday that it had lowered its long-term sovereign credit ratings on the Greece to 'A' from 'A+'.
The downgrade reflected the lack of a resolute strategy to achieve rapid and lasting improvements to the general government primary balance, and to initiate a significant and sustained decrease of the public debt ratio, the international ratings company said in a statement.
At the same time, the 'A-1' short-term ratings on Greece were affirmed; and the outlook is stable.
Standard & Poor's had assigned a negative outlook to the rating on Sept. 13, 2004, a day after substantial revisions to Greek fiscal data were made public.
At that time, Standard & Poor's stated that failure to address the increased fiscal imbalances with lasting structural measures would lead to a lowering of the ratings.
The 2005 draft state budget, submitted to parliament on Oct. 4, 2004, does not contain these structural reforms, and no significant fiscal policy measures are in the pipeline, the statement said.
The ratings could be raised if structural budgetary improvements were to lead to a clearly discernible trend toward the primary surpluses of the late-1990s (about 6% of GDP) and the public debt ratio was to embark on a speedy and sustained decline. Conversely, an increase in the general government debt ratio would bring the ratings on Greece under renewed downward pressure, S&P's said.
Giannis Papathanasiou on Standard & Poor's Decision
Minister of Economy and Finance Yiannis Papathanasiou said that the basic reason Standard & Poor's lowered its long-term sovereign credit ratings on Greece is due to the fact that Greece faces an international financial crisis with high rates in public debt and deficit. As per the public debt he stressed that it has been reduced to 93% of GDP (than 100% in 2004). Bur the rate is still high because the government's priority is the real economy and the boost of financially weaker citizens. In a difficult conjunction like the one we go through, first priority is not to zero the deficit being indifferent to social repercussions, he added. Furthermore, as per the deficit, Mr. Papathanasiou stated that the deficit of many countries of the euro zones will exceed the 3% of GDP. Because we are a country with high deficit rates, we owe-for our own interest and because not because the The Stability and Development Pact imposes so- to gradually reduce the deficit which has to settle to less that 3%. And this will be established by plan without misjudging in any case the need for social coherence. And this is exactly what we are going to promote with the Stability and Development Porgramme we are going to submit by the end of the month, minister of finance concluded.
Source: Athens News Agency
15.01.2009
