Standard & Poor’s, a credit-ratings agency, has warned Greece that it could downgrade its long-term sovereign debt. It has put Greece on ‘credit watch’, meaning it is considering a further reduction of its rating.

The Greek finance ministry issued a statement today (3 December) saying it was “surprised” by the decision, which it blamed on EU discussions on the creation of a permanent stability mechanism for the eurozone.

The Greek statement said: “The S&P decision to place Greece on negative credit watch comes as a surprise, following the early wins of the Greek economic programme in terms both of fiscal consolidation and competitiveness boosting reforms.

“The decision is based solely on developments outside Greece and, in particular, relates to the proposed European Financial Stability Mechanism (EFSM) to be introduced after 2013.”

The finance ministry said the decision was an interpretation of the EFSM’s impact on the markets, which it said “disregards its potential effect on reducing uncertainty”.

It added: “The approach by S&P relates only to countries potentially insolvent after 2013 and cannot apply to Greece, which already receives support that helps to resolve its current debt problem, with very good results so far.”

The European Commission is working on plans for the EFSM, which would replace the temporary European Financial Stability Framework, set up after the Greece crisis.

Credit-ratings agencies downgraded Greek government debt to junk status before the summer over fears that the country would not be able to meet its debt repayment commitments.

As a result, the European Central Bank had to change its policy of not accepting junk status bonds as collateral. The decision was controversial and led to a public disagreement among ECB members when Axel Weber, the president of Germany’s Bundesbank, said he was opposed to the change.  

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