By Andrew Barr
The prospects of Greece leaving the euro now seem unlikely, according to ratings agency Standard & Poor’s.
The agency has this week given the scenario only a one-in-three chance of happening, but has warned that the country will lose its financial lifeline if a government which opposes the bailout program is elected.
The Greeks will go to the polls on the 17th of June after an election last month failed to create a new coalition government.
S&P has said that even if Greece did decide to abandon the euro, a domino effect in the eurozone would not occur, suggesting that other countries would be dissuaded by the negative consequences of a new Greek currency.
“In our opinion, adopting a national currency is likely to be very costly for the Greek population,” the S&P report claims.
Meanwhile another ratings agency, Egan-Jones, has downgraded the UK credit rating this week from AAA to AA-minus.
In a statement confirming the downgrade, Egan-Jones said: “The over-riding concern is whether the country will be able to continue to cut its deficit in the face of weaker economic conditions and a possible deterioration in the country’s financial sector.
“Unfortunately, we expect that the UK’s debt/GDP (ratio) will continue to rise and the country will remain pressed.”
The UK economy contracted by 0.3 per cent between January and March, and has officially entered double-dip recession.
Sovereign ratings for Spain and Italy have also been recently downgraded by Egan-Jones amidst the growing crisis in Europe.
G7 finance chiefs have held emergency talks about the eurozone debt, with Japan’s finance chief urging a “speedy” response for Europe.
George Soros, a billionaire investor, told a conference in Italy at the weekend that Europe had “three months to save the euro”, adding that leaders did “not understand the nature of the crisis.”
He said: “Political and social dynamics are working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. Something has to give.”
G7 member states outside of the eurozone are concerned that Europe’s financial troubles will burden the international recovery. There is still, however, division in Europe over how best to find a solution.
A backlash against austerity has begun in France, with the newly elected Socialist president Francois Hollande pledging to renegotiate the EU fiscal growth pact and to tackle hard-hitting economic policy.
For Scotland, the uncertainty of remaining in a downgraded, double-dip recession hit UK is growing.
Now more than ever, people are looking for an alternative to the cuts and austerity enforced and defended by the Westminster Government.
The Scottish Government has urged Chancellor George Osborne to reconsider his stance on capital investment and free up the funding required for 36 ‘shovel ready’ projects north of the border.
A total of £302 million worth of ready to go infrastructure projects are estimated to have the potential to create over 4,000 jobs.