June 13, 2011
Standard & Poor’s just slashed Greece’s debt rating three notches to CCC from B, meaning Greek debt is “extremely speculative.” The outlook for Greek debt is “negative.”
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. This financing gap has emerged in part because Greece’s access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize.
This lack of access, in our view, creates a gap between committed official financing and Greece’s projected financing requirements. Greece has heavy near-term financing requirements, with approximately EUR95 billion of Greek government debt maturing between now and the end of 2013 along with an additional EUR58 billion maturing in 2014.
Moreover, the downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.
Who could have seen this coming? Aside from a majority of sentient humans?
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