S&P's downgrade adds more fuel to Greece's fire

More woes for Greece's new government and its embattled economy. On Friday, Standard & Poor's downgraded its rating on the nation's long-term sovereign credit rating from "B" to "B-" -- putting it another notch deeper into junk territory.

At the end of January, the new left-wing government led by Syriza came to power in Athens on pledges it would renegotiate Greece's financially crippling $270 billion economic bailout package with the European Union, the European Central Bank and the International Monetary Fund, the so-called troika that oversees that bailout package.

Greece's years-long economic crisis has plunged the country into economic depression and has created both domestic unrest and growing international concerns about a "Grexit" -- or Greece exiting the eurozone and abandoning the region's common currency, the euro.

New Greek Prime Minister Alexis Tsipras and his Finance Minister Yanis Varoufakis have been traveling across Europe this week meeting with a variety of government and economic officials in their campaign for debt renegotiation, so that, in the words of Varoufakis, "we can stay afloat."

But the clock is ticking for the Greek government. On Feb. 28 Athens' current bailout program ends and will need to be renegotiated with the troika.

This stand-off leads S&P to a far from optimistic forecast for the Greek economy. It said the downgrade reflects its view that time is running out for a resolution on a refinancing program with Greece's creditors.

"Although the newly elected Greek government has been in power for less than two weeks, we believe its limited cash buffers and approaching debt redemptions to official preferred creditors constrain its negotiating flexibility," S&P said in a statement.

"In our view, a prolongation of talks with official creditors could also lead to further pressure on financial stability in the form of deposit withdrawals," it continued, "and, in a worst-case scenario, the imposition of capital controls and a loss of access to lender-of-last-resort financing, potentially resulting in Greece's exclusion from the Economic and Monetary Union."

Some analysts are watching events unfold with the apparent certainty of an ancient Greek tragedy.

"Greece has financing needs of around €10bn (U.S. $11.3 billion) in the first half of this year that it cannot meet as things stand," London-based research firm Capital Economics said in its weekly roundup of the European economic landscape. "Recent moves to reverse austerity suggest that remaining bailout money is very unlikely to be paid."

But another analyst, Mujtaba Rahman with Eurasia Group, says while the odds of Greece leaving the eurozone have increased, they remain quite low. And on Thursday, he noted that Germany, one of the eurozone's economic powerhouses, is working to reduce the risk of a Grexit.

German Chancellor Angel Merkel will encourage the troika to give Athens "some room to maneuver with a renegotiated bailout," according to Rahman. "In this context" he added, "a Greek exit from the EU would likely require a series of improbable miscalculations resulting from the ruling Syriza party's political ineptitude or severe financial stress that undermines government stability."