S&P upgrades Greece's rating from selective default

A protestor waves Greek flag in front of the parliament in central Athens November 7, 2012.

NEW YORK (Reuters) - Rating agency Standard & Poor's on Tuesday raised Greece's sovereign credit rating to B-minus with a stable outlook from selective default, citing Europe's efforts to keep the country part of the euro.

"The upgrade reflects our view of the strong determination of European Economic and Monetary Union (eurozone) member states to preserve Greek membership in the eurozone," S&P said.

"The outlook on the long-term rating is stable, balancing our view of the government's commitment to a fiscal and structural adjustment against the economic and political challenges of doing so," the agency added.

Greece's finance minister, Yannis Stournaras, said the move was encouraging but that the country has more work to do.

"This was a very important decision for Greece but we won't rest," Stournaras said. "It creates a sentiment of optimism but the way ahead is long and steep."

Standard and Poor's had cut the rating to selective default earlier this month after the Greek government invited private sector bondholders to participate in a debt buyback meant to help lower the country's debt burden.

The rating agency said at the time that the consummation of the debt buyback would likely see the selective default cured.

Greece's major lenders - EU paymaster Germany and the International Monetary Fund - both endorsed the result of the bond buyback.

The debt buyback helped convince euro zone partners and the International Monetary Fund to unlock 49.1 billion euros in aid by the end of March.

The Greek economy is expected to slump for a sixth straight year in 2013 but might begin to recover in 2014, Stournaras said earlier this week.

Moody's Investors Service rates the country C; Fitch rates Greece CCC. The ratings from all three agencies are speculative. (Reporting by Luciana Lopez, additional reporting by Daniel Bases and Caryn Trokie in New York and Renee Maltezou in Athens; Editing by Chizu Nomiyama, Phil Berlowitz and Leslie Gevirtz)