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S&P boosts its Greek credit rating

Standard & Poor's has raised Greece's credit rating following its successful debt buy-back operation. But a leading lobby has warned that the country is still not out of the danger zone.

Ratings agency Standard & Poor's (S&P) on Tuesday said that it had raised Greece's credit rating by six notches to B-.

The ruling pulls Greece out of what S&P deems to be "selective default," though the agency still considers Greek bonds to be "speculative" or "non-investment grade" papers.

The agency said that the upgrade was a reflection of the fact that eurozone countries had displayed determination to prevent Greece from leaving the euro.

The development comes after Greece's recently successful buy-back; Greece bought back debts worth 30 billion euros ($39.7 billion) at cut rate prices, with the government saying it expected the action to cut the country's overall debt load by around 20 billion euros. The scheme was one of the pre-requisites for Greece to receive its latest tranche of international loans.

But the influential bank lobby, the Institute of International Finance (IIF), warned on Tuesday that the rescue effort for Greece could still run into problems unless the domestic economy turns around.

"With real GDP likely to decline another 4 to 5 percent next year after falling 6 percent this year, and further austerity testing social cohesion, risks to the EU-IMF program will remain substantial," said the IIF.

"Doubts about debt sustainability will persist until growth resumes and government debt is reduced to a more palatable level," it argued in a forecast.

"Continued deterioration in economic conditions restrain (Athens') ability to meet fiscal targets."

Greece's economy, which has been in recession for the past five years, is anticipated to contract by 6.5 percent in 2012.

sej/msh (AP, dpa, AFP)