S&P cuts Greece rating to B-

FXStreet (Córdoba) - Standard & Poor’s downgraded Greece’s sovereign credit rating one notch from B to B-. The outlook remained negative signaling that further cuts are possible. The rating was already below “investment grade”.

“The downgrade reflects our view that the liquidity constraints weighing on Greece's banks and its economy have narrowed the timeframe during which the new government can reach an agreement on a financing programme with its official creditors: EU member states, the EFSF, the ECB, and the IMF,” said S&P in a statement.

According to the rating agency the limited cash buffers and the approaching debt redemptions to official preferred creditors, constrain the flexibility for negotiations. “In our view, a prolongation of talks with official creditors could also lead to further pressure on financial stability in the form of deposit withdrawals and, in a worst-case scenario, the imposition of capital controls and a loss of access to lender-of-last-resort financing, potentially resulting in Greece's exclusion from the Economic and Monetary Union.”

“We could lower our ratings on Greece if we perceive that the likelihood of a distressed exchange of Greece's commercial debt has increased further because official funding has been curtailed, government borrowing requirements have deteriorated beyond our expectations, or Greece's external financing has come under greater stress,” concluded S&P.