Wednesday, May 5, 2010

"The rescue package is not the solution," Moritz Kraemer, head of S&P's

FRANKFURT (Dow Jones)--The EUR110 billion rescue deal agreed by Greece with the International Monetary Fund and European Union at the weekend isn't a long-term solution for the country's problems, a top manager with ratings agency Standard & Poor's was quoted as saying Wednesday by weekly German newspaper Die Zeit. "The rescue package is not the solution," Moritz Kraemer, head of S&P's

European sovereign ratings team, said in an interview. "Things are often confused in the public discussion: now we have EUR110 billion, the Greek case is solved. That's not the case at all--it only brings a pause for breath," Kraemer said. Kraemer, whose team downgraded Greece's long-term sovereign rating to the 'junk' rating of BB+ last week, argued that the Greek government must use the time it has bought to address its problems thoroughly with an austerity plan, but warned that "one problem is that Greece has no precedent in its recent history of being able to implement such a massive program." He rejected suggestions that S&P had exacerbated Greece's problems with its move, the first time it had ever downgraded a euro-zone member state to junk.

The markets "have been considerably more pessimistic than we have been for months," Kraemer said. He pointed out that BB+ credits have a 14% record of defaulting over a 10-year timeframe and suggesting that the market is pricing in a larger risk.

Newspaper Website: -By Geoffrey T. Smith, Dow Jones Newswires (+49 69) 29725-520;

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