Greece says it will not, under any circumstances, default. S&P believe otherwise. It dropped its sovereign debt rating on the southern European nation by three notches.
In the announcement the agency said:
Standard & Poor’s Ratings Services today lowered its long-term sovereign credit ratings on the Hellenic Republic (Greece) to ‘CCC’ from ‘B’. The short-term ratings were affirmed at ‘C’. At the same time, the ratings were removed from CreditWatch negative. The outlook is negative.
The likelihood that Greece will be bailed out may actually have increased in the last day. There are early indications that the disagreement between Germany and the ECB may be bridged soon. “The confrontation between the European Central Bank and Germany over bailing out Greece risks causing so much damage that officials may be forced to compromise”, Bloomberg reported. There are still fears that a Greek default will badly damage the balance sheet of many big banks which hold Greek sovereign paper which would cause a huge spike in the interest rates that financially weak Ireland and Portugal will have to pay
Douglas A. McIntyre
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