Standard & Poor's slapped Greek politicians yesterday by lowering the credit rating of the country from the lowest level recommended for investment BBB+ to BB+. Greece's credit rating dropped by three levels and went into the category of junk investments, i.e. those that are speculative, high risk and are not recommended. Greece is the first country in the eurozone with such low credit rating. S&P warns holders of Greek government bonds, that the probability of not losing their money as a result of bankruptcy of the Greek state is between 30 and 50 per cent. The probability of bankruptcy of Greece is greater than that of Venezuela, Argentina, Ukraine, Iraq and Dubai. Credit agencies have repeatedly warned that the high credit interest of Greece could lead to a new decrease in its credit ratings.
"We believe that opportunities for maneuver of the Greek government are limited because of the gloomy forecasts for the economic growth of the country at a time when pressure for more stringent measures in the public sector is growing enormously," says S&P analyst Marco Mirshnik. According to him the fiscal situation in Greece is so poor that it is not recommended for investment. The agency leaves the door open for a new decrease in credit rating if the government of George Papandreou fails to adhere to strict financial limitations due to local political or other reasons. S&P also leaves a door open for the possibility to increase the country’s credit rating, if the government is strong and firm in the implementation of the remedial reforms.
"What does not kill us, makes us stronger," said once German philosopher Friedrich Nietzsche. Yesterday these words coming from the mouth of the Greek Finance Minister George Papakonstantinou sounded like this: "Ultimately, Greece will emerge stronger from the crisis.” The Minister gave his first interview after his meetings in Washington this weekend for the private TV channel Mega. Minister Papakonstantinou’s appearances in the American capital were graded by the world media as extremely arrogant. “Euro-sinner who does not repent," was the title of Deutsche Welle and many media quoted his statement that those who bet in favor of Greek bankruptcy will lose the last shirt on their backs. Before the Greek media Minister Papakonstantinou was surprisingly upbeat and he denied that he ever agree to eliminate the 13th and 14th salary in the private sector and promised that he will fight to the end to protect the interests of Greece during the negotiations with IMF and the EC.
Yesterday international markets were bored by the slow development of Greek fiscal drama. Spread-index of the 10-year government bonds reached another record - 712 basis points against the German government bonds with the same maturity. For comparison, in September 2009 the same index was 140 basis points. So the interest that the Greek State must pay to holders of 10-year bonds is 9.66 percent. CDS-insurance reached 770 basis points. Crisis experienced the Athens Stock Exchange as well, which index collapsed by 6 percent in one day and settles into the psychological barrier of 1700.00 points. Shares of Greek banks dropped by 9 percent.
"Greece is just the tip of the iceberg," said American economist Nouriel Roubini and warns that after Greece speculators will focus their attacks against Portugal, Spain, Ireland and the United Kingdom, but also against the U.S. and Japan. He criticized governments that they only discuss reforms for the supervision of financial systems, but none has proceeded to action. As if to disprove him, eurozone countries decided to convene summit on May 10 in Brussels to discuss the Greek financial collapse.
Meanwhile, citing Athens source Financial Times reported that the International Monetary Fund discusses the possibility to increase its participation in the rescue package for Greece with €10 billion. Based on the preliminary plan from the total aid to Greece, the eurozone countries had to provide €30 billion and the IMF €15 billion. Right now the Washington financial institution is discussing on raising this amount to €25 billion. Financial circles are increasingly forming the opinion that the aid package for Greece will only repay debts to creditors by the end of the year.