S&P has downgraded Greece's credit rating from CCC to CCC-, and says there is a 50 per cent chance it will leave the Euro.
It made the change because it feels that, unless circumstances change, Athens will probably default on its commercial debt in the near future.
Absent unanticipated favourable changes in Greece's circumstances, a commercial default is inevitable within the next six months.
Commercial debt is not the money it owes to international creditors such as the ECB or IMF, but to banks and insurance groups.
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The credit rating agency said the closure of banks while capital controls are put in place will further weight on Greece's economy, which it predicts will contract by three per cent this year.
S&P said the Greek government's decision to hold a referendum on creditors' proposals rather tan accept them reflected “a further deterioration since June 10 of liquidity conditions in Greece’s banking system, which depends heavily on official financing.”
On Sunday, the ECB said it would no longer increase emergency loan support for Greek banks, intensifying fears of insolvency and ultimately an exit from the Euro.
If Greece does leave the single currency, S&P says it will revise the country's transfer and convertibility assessment from AAA to CCC.