What Constitutes a Greek Default? And Who Decides?

Wall Street Journal
July 21, 2011

The euro-zone crisis is bringing ratings agencies once again into sharp focus, with euro-zone governments eager to avoid anything that could be considered a default as they try to restructure Greece's debt. After several failed attempts, euro-zone officials are now saying the plan could be to allow a default.

But how do the credit ratings agencies decide whether a Greek restructuring plan constitutes a default? Who are the decision makers? And what criteria do they use to make such a decision?

While there are a multitude of ratings companies, market participants tend to look to the opinions of the three largest: Moody's Investors Service Inc., Standard and Poor's Corp., and Fitch Ratings Inc. These companies are paid to issue ratings on different types of bonds, including those issued by companies and banks.

More