S&P downgrades Greece on higher default risks

PARIS: Standard and Poor's slashed its credit rating for Greece on Monday by three notches to CCC, saying there is a significantly higher probability of a default in the struggling eurozone member.

"The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece," said the rating agency.

It said its estimate of a 30 to 50 percent recovery upon default remained unchanged.

"In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece's official creditors, would result in one or more defaults under our criteria," said S&P's Mark Tierney.

This downgrade may be seen as a shot across the bow to European Union plans to force private holders of Greek bonds to participate in a new aid package for Greece by accepting delayed repayment.

European Central Bank executives have argued against any moves that obliged private investors to take part in a Greek bailout as ratings agencies would likely declare Greece in default, causing unknown dangers for the wider 17-member eurozone.

Copyright AFP (Agence France-Presse), 2011