Greece downgraded to 'selective default' by Standard and Poor's
Ailing European nation downloaded from already low 'CCC' rating
Things continue to grind in the beleaguered European nation of Greece. Standard & Poor, or S & P has further cuts Greece's sovereign long-term foreign currency credit rating to 'Selective default" from its already rock-bottom "CCC" rating.
Euro zone finance ministers and the International Monetary Fund reached agreement last month for steps to cut Greece's public debt and help the country regain access to international financial markets.
In an e-mailed statement, the decision to lower the sovereign rating follows the government's invitation to private sector bondholders to participate in the debt buyback "which under our criteria we view as a selective default."
"When the buyback is consummated [believed to be around December 17, 2012], we will likely consider the selective default to be cured and raise the sovereign credit rating on Greece to the 'CCC' category," the statement said.
The outlook on the rating remains negative. Euro zone finance ministers and the International Monetary Fund reached agreement last month for steps to cut Greece's public debt and help the country regain access to international financial markets.
Greece said it would spend 10 billion euros to buy back bonds at a price range that topped market expectations. This is considered a very important step to put the near-bankrupt country's debt back on a reasonable footing.
The buyback will be conducted through a modified Dutch auction in which investors declare at what level they are willing to sell their bonds before Athens sets a final price.
While Greece's economy remains mired in recession, there is a silver lining to the cloud. According to European Central Bank governing council member Christian Noyer, there are reasons to be upbeat that the debt-laden nation will be able to rebound strongly as it works its way through reforms.
Noyer pointed to a pick-up in Greek exports as a sign that the economy is finally on the mend. The rate of growth of Greek exports is now among the highest in the euro zone after costs and wages have been cut significantly.
His comments follow remarks this week by Greece's central bank, which said Greece's economy can recover sooner-than-expected if structural reforms and financial measures are implemented.
Greece now needs to convince investors that it will press ahead with key economic reforms while reducing its ballooning debt, Noyer, who is also France's central bank governor, told journalists.
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