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 ($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.