July 4, 2011
Rating agency Standard & Poor's has cast fresh doubt on Greece's hopes for an economic rescue by warning that a French bank plan to renew maturing Greek bonds could be classified as a default. The agency has also questioned the country's ability to implement its new austerity program.
Credit rating agency Standard & Poor's warned on Monday that a proposal by French banks to roll over Greece's debt could be classified as a default, casting fresh doubts on plans to secure a bailout for the crisis-hit nation.
"It is our view that each of the two financing options described in the (French banks') proposal would likely amount to a default under our criteria," S&P said in a statement.
The rating agency is referring to the so-called Paris model under which banks, insurers and hedge funds would renew maturing Greek debt on different terms. German banks have agreed in principle to join the scheme.
The French proposal envisages that private creditors would reinvest 70 percent of the funds from maturing Greek bonds. 50 percent would be placed in new Greek bonds with 30-year maturities and the remaining 20 percent in bonds without running interest payments.
Under a second version of the plan, private investors would invest at least 90 percent of their expiring bonds in new five-year bonds.
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