Pointing to rising chances of a default, Standard & Poors once again slashed Greeces credit rating on Monday, underscoring the continued concern about Europes sovereign debt mess.
S&P downgraded its long-term rating on Greece to CCC and kept a negative outlook, leaving the door open for further cuts in the next 12 to 18 months. The new rating knocks Greece eight notches into junk territory.
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The ratings company cited significantly higher chances of one or more defaults related to Greeces emerging financing gaps, especially because of a lack of access to market financing in 2012 and possibly beyond.
Near-term financing burdens are heavy, including about 95 billion euros of Greek government debt maturing between now and the end of 2013 and an additional 58 billion euros maturing in 2014, S&P said.
At the same time, S&P said it believes implementation risks tied to the European Union and International Monetary Funds bailout program are rising due to the increasingly complicated political environment in Greece and tough economy.
Unemployment continues to rise in Greece, hitting 16.2% in March 2011, up from 11.6% the year before. S&P said the recession could persist into 2012.
Citing recent comments from government officials, S&P said it believes some official creditors will see restructuring of Greek commercial debt as a necessary condition to additional funding.
S&P said a downgrade to SD could occur if Greece undertakes one or more debt restructurings or maturity extensions on terms that constitute debt exchanges.
On the other hand, S&P said if the EU and IMF reach a deal on a revised bailout that does not result in a default and the program is complied with, the ratings could stabilize at current levels.
U.S.-listed shares of National Bank of Greece (NYSE:NBG) dipped to session lows after the S&P move, but were off just 0.74% to $1.34 on the day.
In response, Greece said the downgrade overlooked the intense talks between the EU, IMF and European Central Bank to find a viable solution to the debt crisis, Reuters reported.
The news didnt help the mood on Wall Street as the Dow Jones Industrial Average fell modestly and hit session lows after the downgrade.