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S&P downgrades Greece into 'selective default' territory

The ratings agency demonstrates it can read, by officially acknowledging that Greece’s bond-swap is a ‘selective default’.

Image: Petros Giannakouris/AP

THE RATINGS AGENCY Standard & Poor’s has formally downgraded Greece once more, making it the first eurozone country to fall into ‘selective default’ territory.

The downgrade, last night, came as S&P said Greece’s bond swap with private investors – in which it hopes to write off some €100 billion from its national debt – was tantamount to a default.

Greece was already deeply in ‘junk’ territory – so much so that when Standard & Poor’s downgraded a number of other eurozone member states last month, it did not even consider downgrading Greece as it was already rated so badly.

Fitch made a similar move last week, officially deeming the Greek actions – which the BBC says has meant losses of 70 per cent for banks who had invested in Greek government bonds – as being the equivalent of burning sovereign bondholders.

Eurogroup president Jean-Claude Juncker said the downgrade had been “dult anticipated and taken into account” when plans for the bond-swap were drawn up.

Although the move was not surprising, the ECB has nonetheless this morning said it would temporarily bar European banks from presenting Greek government bonds as collateral in transactions.

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About the author:

Gavan Reilly

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