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The world's biggest credit rating agency Standard & Poor's lowered the credit rating of Greece by two points - from BB+ to BB-. Standard & Poor's is the second of the three major agencies in the world to do so only in recent days. Moody's lowered the credit rating of Greece by two points too a few weeks ago.

Standard & Poor's warned still on the 2^nd of March that it is very likely to lower the credit rating of Greece, but the government of George Papandreou hoped that the decisions of the Summit of the European Union on the 24^th and the 25^th of March will prevent it. By contrast, exactly these decisions are the first argument of the agency to lower the credit rating. Stopping debt payments is a condition a country to resort to the European Stability Mechanism. Moreover, the obligations to the EU have priority over the obligations to private creditors, they say from Standard & Poor's.

In other words, Greece has no other choice except to repeat recourse to the EU countries but it will first have to announce its debt restructuring and then to turn to the European Stability Mechanism. Once the country stops to pay its debts to creditors, it will receive aid, but it will go mostly for the obligations to the EU countries and private creditors will have to wait.
 
"These two conditions in practice make the ambitions of Greece to return to the capital markets in 2013 impossible," said Standard & Poor's analyst Marco Mirsnik. He added that the financial support granted to Greece by the Troika of the European Union, the European Central Bank and the International Monetary Fund expires in 2013. This along with the lack of access to international markets makes the debt haircut almost real.

At the same time, the agency believes that the macroeconomic situation in Greece is worse than what the government declares. Standard & Poor's believes that the budget deficit will form around a value higher than the declared by the government, which is 9.6% of the GDP. Its analysts estimate that the government of George Papandreou failed to restrict the budget expenditure within the expected limits. In parallel, the budget revenues are lagging behind not only due to reduced economic activity in the country, but also because of the ineffective government fight with tax evasion, says the agency.

"The purpose of Standard & Poor's is to take Greece out of CreditWatch within the next three months after the government announces the specific data on budget execution and the measures for 2011," stated Mark Mirsnik. Following the decision of Standard & Poor's, the Greek spread yield rose and jumped over 950 basis points. The CDS insurances against default rocketed to 9.70 points from 9.65 and ended the day at 9.67 points.

The Greek Ministry of Finance defined the credit rating lowering as "unjustified". "We are not lowered for what we are doing but for what the European Union is doing," interpreted the Prime Minister George Papandreou.