Greece Inches Closer to Default as S&P Axes Credit Rating  

TEMPO.CO, Jakarta - Credit rating agency Standard and Poor (S&P) has downgraded Greece's deep-junk rating another notch to CCC on Wednesday, after the ailing nation postponed its debt repayment to the International Monetary Fund (IMF) last week.

The delay is judged to be reflective of the Greek government's stance, which seems to prioritize its pension funds and other domestic payments above its obligation to repay its creditors, stated S&P as quoted by AFP.

Without a significant shift towards actions that would encourage economic growth, as well as in the absence of a meaningful reform of Greece's public sector, S&P said Greece's debt situation was not sustainable.

S&P said that the lack of a new deal between Greece and its creditors to help secure a bailout package worth 7.2 billion euros could mean that Greece would have to default on its commercial obligations within the next 12 months.

Furthermore, the credit rating agency also advises the Greek government to exercise more control over its financial institutions, in order to stop capital from pouring out further from the debt-stricken nation. In addition, it advises Greece to start issuing a local currency, which is valued at par with the euro, which it could use to meet its domestic debt repayments.

"Greece's current fiscal position raises questions on the significance of the agreement that Greece had signed with its creditors regarding its fiscal targets, especially since Greece's projection on tax revenues and real Gross Domestic Product (GDP) growth seem rather speculative," added S&P.

"Even if Greece manages to reach a deal with its official creditors within the next two weeks, S&P does not see that the deal will be enough to cover its obligations beyond September."

ANTARA