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04 March 2024

S&P less gloomy on Greece debt crisis than financial markets

By Reuters

Standard & Poor's is less pessimistic on Greece's debt crisis than financial markets and believes that the debt problems of some euro zone countries pale in comparison with long-term challenges of population ageing.

S&P warned last week it may downgrade Greece's government debt by one or two notches within a month, citing risks to economic growth that will make it harder for the government to reduce the fiscal gap.

"The political standing of this government is still very high, if recent polls are to be believed," David Beers, S&P's global head of sovereign ratings, told Reuters on the sidelines of a conference.

"We were fairly clear to the market... and that would still, if current trends continue, mean we are less pessimistic than the market is on how this story will evolve."

Australian five-year and the seven-year interest rate swaps rose by 5 to 7 basis points on the comments. "Those headlines give risky assets a little bit of bid and therefore we saw yields move a little higher at close," said JPMorgan interest rate strategist Sally Auld.

S&P rates Greece 'BBB+', or two notches above the lowest investment grade, with a negative outlook.

"Our key conclusion is that even if the current fiscal challenges can be overcome, the window is beginning to close on tackling the bigger risks to creditworthiness from population ageing," Beers told the investment conference. Of the other troubled European economies, Spain is rated 'AA+', Ireland is 'AA', while Italy and Portugal 'A+'.

Asked to comment on a probe on Indonesia's top policymakers – Finance Minister Sri Mulyani Indrawati and Vice President Boediono – and its impact on the sovereign rating, Beers said "the direction of the credit story is not dependent on two individuals".

"We think the political system is reasonably strong." Indonesia has been a star performer among emerging markets in the past year, due to strong fundamentals, thriving consumption, but also crucially because of investor hopes that President Susilo Bambang Yudhoyono would press ahead with reforms.


Greece must help itself first: EU


Greece must restore a balance between its spending and revenues before it can think of getting any foreign assistance, European Energy Commissioner Guenther Oettinger said yesterday.

But Oettinger also hinted at the possibility for foreign support for Greece. "There are considerations for a lot of things," he said. Oettinger, who is a member of Chancellor Angela Merkel's Christian Democrats, said Greece must not expect help from third parties until it does its own homework.

"The government has to first achieve a balance between its income and expenditures," he said.


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