Standard & Poor’s upgraded Greece from selective default to CCC status on Wednesday, but it and other rating agencies argued that the risk of a Greek exit from the eurozone remains considerable if the new government fails to implement the reform program that the country has agreed to with its international creditors.

The upgrade removes one of the obstacles for Greece’s funding by the European Investment Bank. S&P had placed Greece in the SD category due to the recent debt restructuring process. It now has a stable outlook on the country, but warned that there are still some serious risks regarding the stabilization process for the economy, due to a number of factors.

These include the deep recession that will bring about a 5 percent contraction this year and carry on into 2013, while growth prospects remain uncertain, according to S&P. Doubts about the outcome of Sunday’s general election and possible social unrest over austerity measures could undermine the fiscal adjustment, the agency argued.

The market expressed concern about the outcome of the Greek election in strong terms yesterday, highlighting the risks the country may find itself facing depending on the result.

Bank of America said the most likely outcome will be a fragile coalition of PASOK and New Democracy that “may not survive for long” and warns of political paralysis and an exit from the eurozone.

UBS expressed grave worries about the Greek polls, saying it discerns “a high risk for a temporary stop to Greek borrowing.” It notes that even the two main parties have announced they will renegotiate the memorandum with the country’s creditors, and does not rule out a second election as early as June 10, i.e. just five weeks after the upcoming poll.

Morgan Stanley analyst Joachim Fels argued on Wednesday that nothing less than Greece’s eurozone membership is at stake.

Credit Suisse added that it is not certain whether a New Democracy-PASOK government “would command a strong majority in Parliament.”

Merrill Lynch also pointed to a high risk of political paralysis after the election, while JP Morgan sees Sunday’s result clouded by uncertainty.