Financial Times
July 4, 2011
Be careful what you wish for. Those European politicians who cheerfully criticised rating agencies for falling under the influence of their structured credit clients might now wish that the arbiters of debt quality were a little more pliable. Standard & Poor’s, arguably the leader of that small and still powerful pack, has thwarted the latest euro-scheme to keep Greece from being declared in default on its sovereign obligations. S&P explained on Monday that a flat rectangular steel blade attached to a long wooden handle is indeed called a spade.
The French banks have emphasised the entirely voluntary nature of their complex rollover scheme. For S&P, though, this is not the point, any more than the voluntary nature of a condemned criminal’s walk to the scaffold. A default occurs when creditors are forced to accept a loss, whether or not there are negotiations on the hows and how much. The seven-page S&P note makes a persuasive case that the French plan would qualify as a selective default.
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