S&P cuts Greece credit rating to lowest

ATHENS, Greece (AP) -- Standard & Poor's cut Greece's credit rating deeper into junk territory Monday, saying the country is likely to default on its massive debts at least once by 2013 -- a decision Athens said ignored its efforts to secure continued funding in coming years

The rating agency said the downgrade from B to CCC ``reflects our view that there is a significantly higher likelihood of one or more defaults'' as the country tries to close yawning financing gaps over the next two years. It said the outlook is negative.

The new cut came days after Greece's Socialist government unveiled a new austerity program aiming to save around (euro) 28 billion ($41 billion) in new taxes and spending cuts by 2015, in tandem with an ambitious privatization drive intended to raise some (euro) 50 billion ($72 billion).

The twin package comes a year after unpopular pension and salary cuts mixed with higher taxes and retirement ages _ despite previous pledges to avoid more blanket pain for less affluent Greeks. It will be debated in Parliament later this week and is set for ratification by early next month.

The planned new austerity has angered opposition parties, which rejected government overtures aimed to secure some degree of consensus, and drove labor unions to call a general strike on Wednesday.

Parliamentary approval of the combined cutbacks and privatizations is a precondition to secure the fifth installment of a vital (euro) 110 billion ($159 billion) bailout package agreed on in May 2010 with the European Union and the International Monetary Fund.

``The downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate,'' Standard and Poor's said.

The agency said that delaying Greece's debt repayments _ a move proposed by Germany to get private investors to take on some of the bailout burden and give the country more time to reform its economy _ would be considered a default.

The European Central Bank is against Germany's proposed debt extension, arguing that a default by a eurozone country could have devastating consequences on Europe's broader financial sector.

Finance ministers from the 17 euro nations will gather for an emergency meeting on Tuesday to discuss how to help Greece and how to reconcile Germany's requests with those of the ECB.

All three major international ratings agencies have placed Greek government bonds deep in junk _ or non-investor grade _ status.

Greece's Finance Ministry said Monday's downgrade took no account of efforts by the country's creditors to plug the funding gap.

``It overlooks the intense negotiations within the European Commission, the European Central Bank and the International Monetary Fund to find a viable solution that will allow our country's continued financing and the coverage of its borrowing needs in coming years,'' a ministry statement said.

``In any case, (the government) remains set on its course to save the country,'' it said.

Greek Prime Minister George Papandreou faces continued protests and dwindling public support, trailing the main opposition conservatives by four percentage points according to a poll released Sunday. Several of his own Socialist lawmakers have strongly criticized the new measures, although none have openly threatened to vote against them in Parliament.

Peaceful protesters have demonstrated in Athens' central Syntagma Square, opposite Parliament, for nearly three weeks, with more than 10,000 gathering on Sunday.

Hundreds gathered in the square Monday night chanting slogans, while protest organizers have called for a blockade of Parliament during Wednesday's general strike, which will be accompanied by demonstrations in the city center.