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Standard & Poor’s: Increased possibility for Greece to default

18 October 2012 / 18:10:43  GRReporter
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Standard & Poor’s credit rating agency estimates that the risk for Greece to definitely default is increasing again. Analyst for Europe, Middle East and Africa, Moritz Kraemer, states that a CCC rating of the Greek economy portends a possible default, local media report. At the same time, Kraemer believes that the risk for any of the other countries with financial problems such as Spain, Portugal and Ireland to fail is much smaller.

"Maybe we are closer to the bottom," Kraemer said about the debt crisis, adding, "Weather we are close to it or we have reached it depends on political decisions, consistency of policies not just by individual countries but at the European level as well."

It seems that it will be a political decision of when and under what conditions Greece will receive the aid tranche of 31.5 billion euro. The heads of the supervisory Troika of the International Monetary Fund, the European Central Bank and the European Union left Athens this week, failing to reach an agreement with the government on the final version of the fiscal adjustment over the next two years.

According to the lenders’ announcement, both sides have agreed on "the majority of the basic steps required to restore the pace of reforms and to establish the path to the completion of the report." This means that the Greek government has failed to convince the lenders that it will effectively deal with spending cuts in public administration. If there is no consensus and agreement on the particular package of measures, the government has most likely firmly refused to resort to cuts of public workers.

In addition, the representatives of international lenders said, "Discussions on remaining issues will continue from respective headquarters and through technical representatives in the field with a view to reaching full staff level agreement over the coming days. Furthermore, financing issues will be discussed between the official lenders and Greece."

Now that Greece has refused to accept all of the lenders’ proposals, the decision concerning the aid depends only on the will of Europe. Sources in the finance ministry state that the root of the problem with the supervisors remains the issues related to the labour market and some structural reforms associated with the provision of products and services in the local market.

Meanwhile, Spiegel reported that the decision for the payment of the billions of the next aid has been taken, although it has not yet been officially announced. The money is in a special account provided for the Greek case, but it has not been allocated to the country in order to increase the pressure on Athens, which has still a lot to do to trigger the new fiscal measures. Sueeddeutsche Zeitung, in turn, reported that the 31.5 billion euro would be in the treasury by the beginning of November. The report on the progress of the Greek economy which the lenders have to draw up is expected to be released next week, again according to the German edition.

Under the shadow of nationwide protests and the meeting of European Union leaders, the Athens Stock Exchange registered a decrease. The main index of the Greek financial market lost 0.27% and closed at 862.88 basis points on Thursday. The total value of transactions reached 120.9 million euro. Among the profitable concerns was the banking sector, which reported an increase of 0.13% for the day, and the sectors of health (5.3%), trade (2.92%) and construction (2.21%) closed with a positive result too.



Tags: EconomyMarketsTroikaNegotiationsFiscal adjustmentGreeceCrisis
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