Rating agency Standard & Poor's took action late Tuesday on
Greece and held its rating at CCC/C but placed the ailing nation on
negative watch. S&P cited that Greece is likely to need
additional financing from the EU/IMF to fund its budget this year
and also a worsening economy.
The news comes as talks between Greece and its creditors, known
as the Troika, failed to reach a consensus on budget measures to
allow for the release of the next tranche of the bailout payment.
Unless Greek officials can come to an agreement, Greece may be
unable to roll over its debt and could default.
S&P cited in its action that Greece may need further
financing from European leaders just to fund itself through the
rest of 2012. The worsening economy is hurting tax revenues and
increasing deficits. S&P also pointed out that Greece's
financial sector is in the midst of a massive credit crunch. They
also lowered their forecast for Greece's GDP to a 10-11 percent
contraction, whereas the Troika only has estimated a 3-4 percent
contraction. S&P still sees net government debt at 170 percent
of GDP and sees payments in arrears totaling an extra 3-3.5 percent
The sour outlook on Greece is not good for the nation, as it
struggles to appease creditors to receive the next tranche of the
bailout. Greece needs the funds to pay off maturing debt, otherwise
it will have to do so with an auction of bills. A sticking point
between Greece and its creditors is public sector jobs: Greek
leaders want to protect jobs in the discussions whereas the Troika
wants further cuts to public payrolls to fill the gap of budget
Only a few weeks ago, it seemed likely that Greece and its
creditors would reach a deal, as Greek leaders were said to have
agreed to approximately 11.5 out of 13 billion euros of budget
cuts. However, the remaining 1.5 billion euros of cuts have yet to
be resolved. Greece wants to push for further asset sales, however
the pace of privatization has been dismal, according to S&P.
Greece has approximately one month until it needs the funds to
repay the maturing debt.
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