S&P: a Greek default is now likely
MARKETS were thrown back into turmoil as fears of a Greek default rose again yesterday, with the euro falling and the cost of insuring Athens’ debt reaching all-time highs.
Standard & Poor’s added to the anxiety with a multi-notch downgrade of the sovereign, following in the footsteps of Moody’s, which has said that the chance of a default was 50-50.
S&P said that the deadlock over whether to restructure Greece’s debt as part of a new bailout deal made a default “likely”. Yesterday Holland lent its support to Germany’s stance that a rollover of private sector debt must form part of any new aid package.
“Private sector burden-sharing could take the form of a debt exchange offer or an extension of debt maturities,” said S&P, which it said would constitute a “de facto default”.
Berlin and the ECB are at loggerheads over the role of private creditors in a second Greek rescue, with the Bank against restructuring in part due to its own exposure to the sovereign.
Dutch finance minister Jan Kees de Jager weighed in on Berlin’s side yesterday, saying: “I will only consider an additional aid programme for Greece provided… the private sector makes a substantial contribution.”
Five-year credit default swaps on Greek debt jumped 33 basis points to 1,575, so it now costs €1.57m (£1.38m) to insure €10m of debt. The euro fell 1.18 per cent against the Swiss franc and 0.7 per cent versus the dollar.