S&P: Lebanon on watch

Standard & Poor's said it placed its B- long-term sovereign credit rating on the Republic of Lebanon on

CreditWatch with negative implications in light of escalating violence in the Middle East.

The agency said that Israel's bombing of the Rakik Hariri International Airport, its air and sea blockade and its incursions into Lebanese territory will create strains in the Lebanese government's coalition, which includes Hezbollah, depress the economy and complicate economic policymaking.

With government debt at 180% of GDP at year-end 2005 and interest payments half of government revenue - two of the highest ratios among rated sovereigns - the Lebanese government has little fiscal room to maneuver, the agency added.

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