Standard & Poor's Ratings Services on Tuesday lowered its outlookon Greece's long-term credit rating, saying that the financially troublednation will likely need further aid from its international lenders amid aworsening economy and delays implementing harsh austerity measures.
The ratings firm downgraded Greece's long-term sovereign credit rating outlookto "negative" from "stable." Its rating remained at"CCC," well into "junk" status.
Greece's economy is worsening, so it will likely need as much as €7 billion($8.7 billion) in additional financing, or 3.7 percent of its gross domesticproduct, from the European Union and the International Monetary Fund, S&Psaid.
The move to lower the outlook reflects the possibility that S&P willdowngrade Greece's rating if the nation fails to get additional funding fromother eurozone countries and the IMF.
The country has been relying on such loans since high interest rates pushed itout of bond markets in 2010. In return, it has imposed harsh austerity,slashing pensions and salaries, repeatedly hiking taxes and increasing theretirement age.
The firm projects that Greece's gross domestic product will shrink by 10 or 11percent over this year and next. The European Union and IMF have assumed GDPwill slow only between 4 percent and 5 percent during that period.
Greece has received two bailouts totaling €240 billion from other eurozonegovernments and the International Monetary Fund after bond investors would nolonger lend it money at affordable rates. In return for the money, Greece issupposed to cut its budget deficit and reform its economy. However, the economyhas continued to contract and the new government of Prime Minister Antonis Samarashas said it wants more time to meet some of the conditions.
Even so, S&P anticipates that Greece's government will find it difficult tomake the additional cuts required to satisfy the conditions to get its nextslate of funding from the EU and IMF.
"We see the likelihood of shortfalls, owing to election-related delays inthe implementation of budgetary consolidation measures for the current year, aswell as the worsening trajectory of the Greek economy," S&P said.
A cutoff of bailout money could lead to Greece defaulting on its remainingobligations and possibly leaving the euro currency.
International bailout creditors are closely scrutinizing the country's laggingausterity and reform program, and a negative report next month would likelylead to the vital rescue loans being halted. That would leave the governmentunable to pay pensions, salaries and service its debts, which in turn couldforce Greece to leave the 17-member eurozone, a move that would reverberatethroughout global financial markets.