Following on from Moody's the week before, Standard & Poor's had a similar impact on global equity and credit markets, when it became the first of the ratings agencies to cut its credit ratings on Greece to junk. S&P cut the long-term rating on the sovereign by three notches to 'BB+' and lowered the short-term rating to 'B' from 'A-2'. The outlook is negative.The other action that upset the markets was the assignment of a recovery rating of 4. This implies an expected recovery rate on Greek debt of only 30 per cent to 50 per cent, should Greece default. Markit noted that recovery swaps had previously been trading around 55 per cent.S&P now expects the debt to GDP ratio to reach 124 per cent this year and 131 per cent next year. Nevertheless, S&P expects that a multi-year EU/IMF support program for Greece will be delivered, significantly easing the country's near-term liquidity challenges.On the same day, S&P also lowered its ratings on Portugal by two notches to 'A-/A-2' from 'A+/A-1' and assigned a negative outlook. S&P said Portugal's fiscal and economic structural weaknesses leave it in a comparatively weak position to address the significant deterioration in its public finances and expected lacklustre economic growth prospects over the medium term.The negative outlook reflects S&P's assessment of the risk of a further downgrade should fiscal consolidation fall short of expectations or should concerns over government liquidity mount. The government deficit in Portugal rose to 9.4 per cent of GDP in 2009 from 2.7 per cent in 2008 and government debt is expected to continue to rise rapidly, to 95 per cent of GDP by 2013, from 66 per cent in 2008. The next day it was Spain's turn. S&P lowered its rating by one notch to 'AA' and assigned a negative outlook. The 'A-1+' short-term rating was affirmed. The downgrade primarily reflects S&P's downward revision of its medium-term macroeconomic projections. It now believes that the Spanish economy's shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than previously assumed. S&P is now projecting that real GDP growth will average 0.7 per cent annually in 2010-2016, versus previous expectations of above 1 per cent annually over this period. The negative outlook reflects the possibility of a downgrade if Spain's budgetary position underperforms to a greater extent than currently anticipated.