Greece, ratings agencies, and the rollover plan

Richard Milne London— Financial Times

So, has Greece defaulted?

No. But Standard & Poor’s, the rating agency, has said it will do so if the German and French banks’ plan to roll over Greek debt goes ahead. In that case, Greece would be rated as SD, “selective default”. Its current rating is CCC, the lowest rating in the world.

Aren’t these the same rating agencies that were discredited by the financial crisis?

Indeed. The agencies’ reputations were damaged because of their persistently positive ratings of mortgage-backed securities and credit derivatives before the financial crisis. However, S&P, Moody’s and Fitch – the big three – argue that their sovereign credit ratings are far more dependable. Even the International Monetary Fund tends to agree – it noted recently that in the past 35 years every country that defaulted was rated below investment grade for a year beforehand. S&P downgraded Greece to that level in April 2010.

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