The situation in Greece continues to deteriorate, particularly after the country was given a “CCC” rating late on Monday, the lowest credit rating of any economy ranked by Standard & Poor’s, the global credit rating agency. That evaluation came as Greece’s economic issues intensify and disagreement among eurozone leadership over a second bailout for the debt-ridden country reaches a deadlock.
If no second bailout is offered, Greece will probably be incapable of paying its bills and will default on its debt. S&P said the downgrade reflects the agency’s view that “there is a significantly higher likelihood of one or more defaults.”
But as more time goes by, and Greece’s domestic political situation becomes increasingly volatile, it is unlikely the leaders of Central European countries — who want to prevent default at any expense, fearing a financial earthquake in Greece might send tremors through other troubled countries, including Portugal and Spain — will be more willing to dole out the cash.
[From Societe Generale:] “With Greek unions calling for another general strike in Greece today, it would be staggeringly embarrassing for European Leaders to agree a new package for Greece later this month, only to have to concede that Greece needs even more money later in the year if Greek slips further behind on its programme targets.”
Already in the first two quarters of current fiscal year Greece’s tax revenues were behind target while public spending was over budget.
Things certainly do not look good for Athens. Barely a year after Prime Minister George Papandreou’s government was granted a first 110-billion-euro aid package, the EU, the IMF and the ECB are working on a second financing deal, and the cost of insuring Greek debt against default is already the most expensive in the world.
Meanwhile, in Athens’ Syntagma main square, police shot tear gas into a massive crowd of demonstrators, numbering close to 100,000 by some estimates, who were encircling the Parliament and preventing the access of MPs, who had planned to begin discussing the government’s latest austerity plan this morning.
Several MPs said they were attacked while trying to enter the Parliament by demonstrators throwing bricks, stones and eggs.
Greek PM George Papandreou has offered to step down to facilitate formation of national unity government, Reuters reports. The aim of this unity government is an administration with a consensus on future austerity measures.