S&P Affirms Greece's Rating, Ends Downgrade Review

Standard & Poor's on Tuesday affirmed its ratings on Greece and ended its review for a downgrade, saying the government's recent deficit reduction measures are supportive of the ratings.

S&P said the outlook on the rating is negative, however, indicating a downgrade is still likely over the long term.

"Despite the new measures, we think it will be difficult for Greece to comply fully with its planned consolidation path, reducing its deficit to 5.6 percent of GDP in 2011 and 2.8 percent of GDP in 2012, if it does not implement additional measures in the coming years," S&P said in a statement, referring to gross domestic product.

S&P affirmed Greece's long-term sovereign rating at BBB-plus, the eighth-highest investment-grade rating.

In explaining its affirmation, S&P cited the Greek parliament's March 5 approval of its third set of deficit reduction measures to bolster its consolidation strategy and meet a deficit target of 8.7 percent of GDP in 2010.

An additional package which includes spending cuts and taxes will bring total budgetary efforts for 2010 to 16 billion euros, or 6.9 percent of 2010 GDP, S&P said, citing the government's estimates.

"We view the government's total package of measures as appropriate to achieve its 2010 fiscal target, given the deterioration in the country's growth prospects," S&P said. The agency said it expects the recession to continue, with real GDP contracting by 4 percent this year.

The euro extended gains against the U.S. dollar on S&P's announcement, rising to a session high of $1.3771 from 1.3740 just prior to the announcement. It is currently trading up 0.59 percent against the greenback at 1.3753.