S&P downgrade Greece despite German bailout approval

Standard & Poor’s has downgraded Greece’s long-term rating to “Selective Default”. The news came as a blow to Athens, which had barely had time to give a sigh of relief after Germany had approved its second bailout.

But it is not all bad news, the downgrade is linked to measures as part of the rescue plan which will wipe off 100 billion euros of Greek debt.

The earlier vote in Germany’s parliament produced a comfortable victory for the government. However Chancellor Angela Merkel is facing a growing backbench revolt against pouring in yet more money in support of the euro zone. At the same time others such as Renate Kunast of the Greens Group have criticised her for being indecisive.

“I know that not all our homework is done. We must not hesitate like we have been doing. Merkel’s hesitation makes the crisis bigger and more expensive,“said Kunast.

Frank Schaffler (FDP) was more outspoken: “We need three things: Greece to leave the Eurozone and at the same time there must be a debt cut. We should use all the pressure we can. Then we can talk about building up the infrastructure again etc.”

Merkel had warned that refusing the bailout package would have a devastating domino effect on other countries. But now she is under pressure to boost the euro zone’s firewall fund which she may find too difficult to square at home.

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