Washington: Standard & Poor's downgraded Greece's credit rating deeper into junk territory today, saying the government's decision to hold a referendum on creditor proposals brought it closer to default.
"We interpret Greece's decision to hold a referendum on official creditors' loan proposals as a further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership," said S&P.
It cut Greece's already deeply-junk rating to 'CCC-' from 'CCC'. Absent unforeseeable favorable changes in Greece's circumstances, "a commercial default is inevitable within the next six months," the ratings firm said. In a rating downgrade earlier in June, S&P saw the likelihood of a commercial default within the next 12 months.
S&P said that the inability of Prime Minister Alexis Tsipras's government to agree with its official creditors on a loan program was a sign that Athens would likely miss its payment obligations due on June 30, including the 1.5 billion euros (USD 1.7 billion) to the International Monetary Fund.
"Given that the government appears willing to accept the consequences on its banking sector and economy from the failure to reach an agreement, we now see a 50 percent likelihood of Greece eventually exiting the eurozone," it said. S&P had cut Greece's junk rating by one notch to 'CCC' on June 10 after the cash-strapped country delayed a debt payment to the IMF.