Public finances warning for new gov’t

Just a day after the European Commission sternly reminded Greece of its commitment to fiscal improvement regardless of the outcome of the upcoming elections, ratings agency Standard & Poor’s (S&P) said further weakening of public finances could prompt a ratings downgrade. Marko Mrsnik, an associate director at S&P, said that whatever government is elected on October 4, it will need to tackle the long-term challenges that put additional pressure on public finances. Structural improvements that lead to debt reduction and measures to contain age-related spending, such as healthcare and pension costs, could result in ratings being raised, Mrsnik told Reuters, adding that «the continued weakening of public finances could bring ratings under downward pressure.» Greece is currently rated A- by Standard & Poor’s, the lowest among eurozone members, with a stable outlook. A ratings downgrade would translate into higher lending costs for the government as investors would demand higher interest to own Greek bonds. On Monday, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said the newly formed Greek government will need to provide an update as to how it intends to reduce its budget deficit by the end of October, just a few weeks after the elections.