By Michael Calia 

Standard & Poor's Ratings Services placed its ratings on Greece's sovereign debt on watch for downgrade on the heels of the Greek national elections earlier this week that elevated the leftist Syriza party to power.

The action follows a move earlier this month by Fitch Ratings, which changed its outlook on Greece's ratings to negative.

"The CreditWatch placement reflects our view that some of the economic and budgetary policies advocated by the newly elected Greek government, led by the left-wing Syriza party, are incompatible with the policy framework agreed between the previous government and official creditors, " S&P said in a news release.

"In our opinion, if the new Greek government fails to agree with official creditors on further financial support, this would further weaken Greece's creditworthiness."

S&P also cited the country's weak gross domestic product growth as a "pronounced risk" to its debt sustainability.

The firm, calling the country's recovery "gradual but weak," had increased its rating on Greece to B from B-minus in September, while assigning it a stable outlook. At the time, S&P cited strong demand for Greek bonds, as well as progress from the government's finance ministry in achieving budget surpluses.

On Wednesday, S&P warned that it could lower Greece's ratings if negotiations with creditors the European Union, the European Central Bank and the International Monetary Bank fail.

The firm's concerns were echoed by other market observers.

RBS macro credit strategist Alberto Gallo said that he thinks the country's negotiations with creditors are "likely to become more confrontational." Yet, he said there could be ways forward to break any potential stalemates.

"We think in the end the best solution for both parties is a renegotiation of terms, not only maturities, but linking debt payment to growth targets," Mr. Gallo said. "This would avoid moral hazard like in a straight haircut, but also make payment more realistic."

--Chiara Albanese contributed to this article.

Write to Michael Calia at michael.calia@wsj.com