GREECE - Standard & Poor's has slashed Greece's long term credit rating from B to CCC, amid fears private sector debt proposals will amount to a default.
S&P warns plans from French banks to rollover Greek debt could effectively put the country into selective default.
S&P said in a statement: "It is our view that each of the two financing options described in the proposal would likely amount to a default under our criteria."
France has put forward two options for rolling over Greek debt.
It proposed financial institutions invest either 70% of the proceeds of their maturing Greek government bonds in newly-issued 30-year Greek government bonds, or invest 90% of the proceeds in newly-issued five-year Greek government bonds.
However, S&P said there was a growing concern that further debt restructuring would be needed across the private sector.
"The downgrade reflected our view of the rising risk that an enhanced official financing package addressing the Greek government's 2011-2014 financing needs could require private sector debt restructuring in a form that we would view as an effective default of its debt obligations under our ratings criteria," said the group.
The ratings agency added a near-term default is likely to cause financial contagion in Europe and globally due to the amount of Greek assets tied up in European banks.
The latest downgrade comes after the Greek parliament last week agreed a tough austerity package in order to secure additional funding from the IMF.
S&P downgrade also follows Moody's move to slash its credit rating for Greece by three notches at the start of last month, placing it deeper into the junk category on concerns it will not be able to stabilise its debt pile.
The ratings agency slashed Greece's rating from B1 to Caa1.
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