Standard & Poor's Ratings Services has downgraded Greece’s sovereign credit rating to 'selective default' in response to the country’s decision to involve the private sector in its comprehensive debt restructuring.
Greece’s move “constitutes the launch of what we consider to be a distressed debt restructuring,” the US ratings agency said on Monday.
Greece has become the first eurozone member in its 13-year history to be officially rated in default, down from its previous rating of ‘CC’.
However, S&P said that once the debt swap is concluded, it will likely raise Greece's sovereign credit rating to the 'CCC' category.
Greece has negotiated the biggest debt restructuring in history as it seeks to reduce national debt to 120 percent of gross domestic product by 2020, from 160 percent last year, and to meet the terms of a 130-billion-euro ($170 billion) international bailout.
The private sector involvement entails a “debt swap” which aims to slice 100 billion euros off more than 200 billion euros of privately held debt if all investors participate.
The Greek government said the move was expected and would not hurt the banking industry.
"This rating does not have any impact on the Greek banking system since any likely effect on liquidity has already been dealt with by the Bank of Greece," the Greek Finance Ministry said in a statement issued on Monday.
Greece has the highest debt burden in proportion to the size of its economy in the 17-nation eurozone. Despite austerity measures and the bailout funds, the country has been in recession since 2009.
Source: Press TV, 28 Feb 2012