June 13, 2011
Greece took a step nearer an outright debt default after Standard & Poor's cut its credit rating from B to CCC.
The country is now only two notches away from S&P's benchmark default rating, which would signal it is unable to meet its debts. It is now the lowest rated economy in the world – behind Ecuador, Pakistan and Jamaica. The ratings agency added that the outlook is negative, suggesting another possible downgrade.
Greece's economy is the subject of heated debate in the EU. The bloc is hoping to add further funds to the €110bn (£97bn) already allocated to Greece when finance ministers meet at the end of next week. But wrangling between Germany, France and the European Central Bank has prevented a deal being hammered out.
Politicians in Greece are also at loggerheads, with MPs opposed to the socialist government's public spending cuts and tax rises threatening to veto any deal with Brussels.
The left-leaning Athens administration is also under pressure from unions, which are preparing for a general strike on Wednesday to protest against the likelihood of even more painful cuts as the price of further EU funds.
Before S&P issued its downgrade, the cost of insuring Greek sovereign debt hit a new record high. A credit default swap (CDS) insuring €10m of Greek debt jumped to €1.6m.
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