Moody's: Greek Default Raises Risk for Others

Wall Street Journal
June 9, 2011

The risk of a credit default for peripheral euro-zone countries will increase in the future, and a default on Greek debt would increase the risk of the same happening in Ireland and Portugal, Moody's Investors Service said Thursday.

A credit default can't be both orderly and meaningful because a substantial default would have to include a "haircut," or a reduction in face value of the debt, Bart Oosterveld, managing director in charge of Moody's sovereign risk, said at a press conference in Frankfurt.

Mr. Oosterveld reiterated that a voluntary restructuring of Greek government debt would be hard to imagine at this point, noting that half of the countries bearing Greece's current "Caa1" rating have defaulted within five years.

Mr. Oosterveld's doubts about a voluntary restructuring of Greek debt suggest a German-led proposal to swap existing Greek debt for bonds with longer maturities might not pass muster with credit-rating companies.

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