Greek opposition sets demands as EU/IMF verdict nears

Standard & Poor's downgraded Greece's credit rating by three notches Monday, making it the world's lowest after the agency said a likely debt restructuring would be considered a default.

S&P cut Greece's long-term sovereign credit ratings to CCC, just four steps away from default, from B. The short-term rating was affirmed at C and all the ratings were removed from credit watch.

The outlook on the long-term rating remains negative, however, in a sign that another downgrade is likely in the next 12 to 18 months.

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Greece had its credit rating cut three levels by Standard & Poor’s, which branded the nation with the world’s lowest debt grade and said a restructuring looks “increasingly likely.”

The move to CCC from B reflects “our view that there is a significantly higher likelihood of one or more defaults,” S&P said in a statement today. “Risks for the implementation of Greece’s EU/IMF borrowing program are rising, given Greece’s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.”

Credit-default swaps on Greece, Ireland and Portugal surged to records today on concern governments’ struggles to resolve the turmoil will threaten their ability to pay off their debts.

“The ratings agencies are now playing catch up with the market,” said Gianluca Salford, a fixed-income strategist at JP Morgan in London. “The market is pricing in a very high probability that there will be a credit event around Greece. The agencies are just catching up to the negativity that’s already priced in by the market, not the other way around.”

“Our negative outlook indicates that a downgrade to ‘SD’ could occur if Greece undertakes one or more debt restructurings or maturity extensions on terms that constitute distressed debt exchanges as defined by our criteria,” S&P said. SD is a "selective default.'' A restructuring would likely “result in one or more defaults under our criteria.”

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