May 9, 2011
Private holders of Greek debt will probably be asked to share the pain if the country gets easier terms on European Union bailout loans, Standard & Poor’s said on Monday as it downgraded the country’s debt once again.
The ratings agency’s forecast that Greece faces a de facto debt restructuring put European policy makers in a familiar position: forced onto the defensive by a relentless flow of negative news and market reaction that far outpaced the speed of government decision-making.
The S.& P. downgrade, reducing Greece to the same creditworthiness as Belarus, followed several days of speculation ignited by a report on Friday by Spiegel Online that finance ministers from Europe’s largest countries were holding a secret meeting in Luxembourg at which they planned to discuss whether Greece should leave the euro zone.
E.U. leaders angrily denounced suggestions that they were considering such an apocalyptic situation, and it was unclear whether the meeting in Luxembourg was secret — or simply so routine that no one had bothered to mention it to the news media. Even Spiegel’s article portrayed a Greek exit from the euro zone as unlikely.
That was almost beside the point, though, as the reports awoke fears that Greece remained on a path to fiscal disaster and that European leaders did not have a convincing plan to prevent the country from defaulting.
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