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December 2, 2022
WORLD

Moody’s cuts Greece rating amid default warning

ATHENS – Credit rating agency Moody’s has cut Greece’s rating, warning that a planned debt swap would constitute a default, BBC News reported. The rating was cut another three notches from Caa1 to Ca – just two more notches shy of a default rating.

“The announced EU programme… implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%,” the agency said. The debt swap would increase Greece’s borrowing terms by up to 30 years.

However, a statement last week from the Institute of International Finance conceded that the debt deal would cost private sector creditors an estimated 21% of the value of the Greek debts they currently hold. It comes after another rating agency, Fitch, warned that it too expected the deal would mark a “selective” debt default by Athens.

The debt exchange with private sector lenders is part of a comprehensive package announced by European leaders to shore up the euro and prevent the Greek debt crisis from spreading to other economies. Despite Moody’s view that the debt swap deal would constitute a default, the agency was generally upbeat about Greece’s longer-term prospects.

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