June 13, 2011
S&P Knocks Greek Rating again "restructuring more likely than not"
Wall Street Journal carries the bad news:
"Standard & Poor's slashed its ratings on Greece three notches, making it the firm's lowest-rated government debt in the world, citing its belief of a higher likelihood of one or more defaults over the next 12 months.
The credit-ratings company said it thinks Greece's access to market financing next year and possibly beyond is unlikely to materialize—creating a gap between the official committed financing and projections."
New York Times: "Awkward Timing"
Article by Landon Thomas, Jr, at The New York Times :
"The downgrade comes at a particularly awkward time for Greece. The government is attempting to persuade legislators to accept a fresh set of austerity measures. At the same time, Germany, the dominant economy in the 17-member euro zone, is proposing that private sector bond holders accept some form of a loss on their Greek bonds as a condition for a broader rescue package for Greece that could approach 100 billion euros.
...In its press release, S&P said that its downgrade reflected the reality that any form of debt exchange — whereby bondholders would trade their shorter-term debt for longer-dated paper — would be seen as harmful to creditors and thus, in the eyes of S&P, would be equal to a default. S&P said if that it occurred, Greece’s rating would reach the level of D.
The ratings agency also mentioned the continuing depths of the Greek economic slump, pointing out that unemployment rate was now at 16.2 percent. Greece has financing needs of close to 160 billion euros through 2014. Given these steep requirements and the difficulties the government is having in pushing through its austerity package, S&P concluded that some form of restructuring is now more likely than not. "
Four Greek banks were pinpointed in the S&P news release:
- National Bank of Greece
- Eurobank Ergasias
- Alpha Bank
- Piraeus Bank