| CATEGORY: INTERNATIONAL ECONOMIC |
Wed 08 Aug 2012
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LONDON (SHARECAST) - Credit ratings agency Standard and Poor's has lowered its rating outlook for Greece, saying that the sovereign could be in for another downgrade if it fails to secure the next tranche of aid from its international lenders.
In a statement on Tuesday night, S&P cut its long-term sovereign rating outlook on the Hellenic Republis from 'stable' to 'negative'. Its credit rating still remains at 'CCC'.
"Following delays in implementing budgetary consolidation measures and a worsening Greek economy, we believe Greece is likely to require additional financing for 2012 under the EU/International Monetary Fund (IMF).
"We consider the Greek government will find it difficult to make further cuts to meet the conditions to secure the next disbursement of the next tranche of funding from the EU/IMF Program," S&P said.
The agency said that "shortfalls" are likely as the elections may delay the government implementing of budgetary consolidation measures this, "as well as the worsening trajectory of the Greek economy."
During 2012-13, Greece is expected to contract by 10-11% cumulatively, according to S&P. However, the EU/IMF programme assumes a gross domestic product (GDP) decline of just 4-5%.
"In our opinion, the deepening contraction in Greek GDP beyond the EU/IMF Program's assumptions and the related worsening of the fiscal position imply a high likelihood that Greece will require additional financing of as much as €7bn (3.7% of GDP) for 2012," the agency said.
"This takes into account a fiscal deviation of at least €3bn (1.5% of GDP) and IMF year-end arrears targets, which imply the need to pay arrears down by about €4bn or 2% of GDP. Our estimate of additional financing needs could, however, be reduced if arrears or deficit targets are relaxed."
BC
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