S&P declares Greek 'selective default' after bailout

Greek Parliament building Austerity measures have prompted mass demonstrations in Greece

Rating agency Standard & Poor's has classified Greek debt as in "selective default" following the deal it made with creditors to reduce its debts.

S&P says the terms of that deal triggered the latest downgrade. Greek debt already had a "junk" grade rating from the agency.

Separately, the European Central Bank said it was suspending the eligibility of Greek bonds as collateral for loans to commercial banks.

It said this would run until mid-March.

The ECB explained that by the middle of next month it would start to accept the bonds again, because a programme for eurozone nations to provide supplementary collateral to insure the ECB against losses is due to come into effect.

'No impact'

Banks and other financial firms are being asked by Greece's government to take a 53.5% loss on their Greek sovereign bonds.

The plan was agreed by the Greek parliament last week, and, if backed by Greece's creditors, it would wipe out 107bn euros (£90bn; $142bn) of the country's debt.

S&P said that when the debt exchange was complete it would assess Greece again and possibly raise its rating.

The Greek government said S&P's move had been expected and added it would not hurt the banking industry.

"This rating does not have any impact on the Greek banking system since any likely effect on liquidity has already been dealt with by the Bank of Greece," the finance ministry said in a statement.

Last week, rival credit rating agency Fitch also downgraded Greece's debt.

More on This Story

Global Economy

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.