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Greek debt crisis

May 9, 2011

Greece has had its credit rating reduced once again by Standard & Poor's. The latest downgrade is in response to worries that Greece will not be able to meet debt-reduction targets.

Euro coins standing on end, tipping toward each other
Greece is struggling to manage its debtImage: fotolia

The credit rating agency Standard & Poor's slashed the credit rating of Greece once again, downgrading the debt-laden country to B from BB-, meaning Greek bonds have dropped further into 'junk' status. The downgrade reflects a higher risk of default for debt-ridden Greece, making investment in its bonds riskier.

The move follows a meeting over the weekend between Greece and experts from the International Monetary Fund and European Union. Investors have become increasingly jittery due to Greece's failure to meet deficit-reduction targets and successfully implement a package of austerity measures.

A year ago, Greece accepted a bailout from the IMF and EU but has struggled to pay it back.

In a statement, S&P said "there is increased risk that Greece will take steps to restructure the terms of its commercial debt, including its previously-issued government bonds."

Easing pressure on Greece

Speculation indicates that Greece may need principal reductions of up to 50 percent in order to bring the country's debt down to a manageable level.

Joaquin Almunia
Almunia downplayed speculation that Greece would drop the euroImage: picture-alliance/ dpa

Another possible solution is to further lower Greece's interest rates, a move that Michael Meister, vice-chair of the Christian Democratic Union's parliamentary faction in Germany, supported in comments to German public radio on Monday.

The continuing financial problems plaguing Greece have led to speculation that the country would leave the eurozone and give up the euro. However, European Competition Commissioner Joaquin Almunia said on Monday that "nobody will abandon the euro."

"[That] would mean completely ignoring the intolerable difficulties [it would bring]," he told Spanish reporters.

Author: Matt Zuvela (Reuters, dpa)
Editor: Nicole Goebel