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S&P upgrades Greece out of selective default

Associated Press Published: May 2, 2012

ATHENS, Greece (AP) — The Standard & Poor's ratings agency lifted Greece's credit grade out of default on Wednesday after the country completed a major debt writedown with private creditors.

It upgraded the country from selective default to 'CCC', still in junk status, and gave it a stable outlook, which means no further ratings changes are being considered.

Athens finalized its bond swap, the largest in history, on April 25. The deal wiped €100 billion ($132 billion) off Greece's debt and saw private bondholders take a cut of about 75 percent on the real value of their investment.

An integral part of the conditions for the crisis-hit country to continue receiving international rescue loans, the bond swap aims to trim Greece's debt from about 165 percent of gross domestic product last year to about 120 percent by 2020.

The finance ministry said on April 25 about €199 billion ($262.9 billion) worth of bonds have been exchanged, out of the total €205.5 billion in eligible paper owned by banks, pension funds and other private bondholders.

"While the exchange has, in our view, alleviated near-term funding pressures, Greece's sovereign debt burden remains high," S&P said in a statement.

Greece has been relying on billions of euros in international rescue loans since 2010, after years of overspending and mismanagement of the country's finances left it locked out of the international bond market and facing a potentially catastrophic bankruptcy.

In return for two bailouts, Greece has imposed harsh austerity measures that have included repeated rounds of tax hikes, as well as cuts to pensions and salaries. The measures hammered the economy, which is in the fifth year of a recession.

Budget figures announced Wednesday showed Greece's deficit rose to €4.7 billion ($6.2 billion) in the first quarter of 2012, from €2.8 billion ($3.7 billion) a year earlier. But state spending improved when interest payments were not included — with Greece achieving a primary surplus of €2.3 billion in the first three months of the year, compared with €518 million ($680.2 million) last year, according to data from the Finance Ministry's General Accounting Office.

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