A man empties out the remains of an olive oil container before dumping it in the Greek city of Thessaloniki. S&P now deems Greek government bonds firmly in 'junk' territory. Nikolas Giakoumidis/AP
Credit Ratings

Greece's credit rating now the lowest in the world

Standard & Poor’s drops Greece another three notches and says any restructure will be considered a sovereign default.

THE RATINGS AGENCY Standard & Poor’s has downgraded the credit rating of Greece by three notches – giving the Mediterranean country the lowest S&P ranking of any country in the world.

The agency last night cut Greece’s rating from B, two notches below the ‘junk’ threshold, to the next-worst CCC grade – and warned that any attempt by Greece to restructure the repayments on its mounting debt would be labelled a default.

The CCC grade officially indicates that Greece is “currently vulnerable and dependent on favourable economic conditions to meet its commitments”.

The Wall Street Journal reported S&P’s concerns that even if Greece didn’t default as a result of its ongoing talks with the EU and IMF over a second bailout, it was likely that bondholders would have to take some losses on their investments by 2013.

If that occurs, the agency will slash the rating even further, down six notches to the dreaded D – standing for default. added that Greece now enjoyed lower ratings than the likes of Ecuador, Jamaica, Pakistan and Grenana – though it added the caveat that S&P did not offer a rating on every single country, meaning some countries could still be less creditworthy than Greece.

“In our view, Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece’s official creditors, would result in one or more defaults under our criteria,” S&P said.

Greek ten-year bonds briefly hit the 17 per cent mark for only the second time yesterday, before closing the day at a nauseating 16.904 per cent.

The New York Times suggests that discussions on arranging Greece’s second bailout, worth a reputed €100bn, are hinging on whether a default should form part of the rescue conditions.

Germany is said to be actively pushing that solution – against the wishes of the European Central Bank, which fears a chain reaction of European defaults if Greece becomes the first to renege on its current debts.

Greek ministers approve new austerity measures >

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