S&P affirmed, on September 11, its ΄CCC+/C΄ foreign and local currency long-term and short-term sovereign credit ratings on Greece, with the outlook remaining stable. The affirmation reflects the agency’s assessment that the Greek government depends on favorable business, financial, and economic conditions to meet its financial commitments.

Absent additional official debt relief or stronger nominal economic growth, they believe Greece΄s government debt may be unsustainable. S&P also believes that the scheduling of these elections will likely delay the disbursement of the next tranche to Greece under the ESM program. As per the S&P, the implementation of reforms required under Greece΄s 3-year official loan program will only begin once a new government is in power.

S&P expects the Greek economy will shrink by 3% this year. On the one hand, the introduction of capital controls has severely depressed retail trade, and has hindered export performance by shutting down trade financing lines for key inputs. On the other, the disbursement of the first €26bn tranche of the Financial Assistance Facility Agreement loan to Greece, which includes €10bn in fresh capital for Greece΄s distressed banks, should help gradually to restore confidence in Greece΄s financial stability.

According to the agency’s view, a key question for the economy in the next few years is whether Greece can attract foreign investment, including equity inflows, to upgrade its capital stock and create jobs, especially in the country΄s relatively small tradable sector. Finally, S&P does not anticipate that capital controls in Greece will be lifted until European Institutions complete their review of the banking system΄s capital requirements late this year or in early 2016. Although the Greek economy remains fragile and the Sept. 20 election outcome uncertain, they think the risk of Greece leaving the eurozone has receded to less than a 33.3% likelihood