CMA-report: Greece tops sovereign debt risk list

Posted by in Economy

Greece tops the list of 10 most risky sovereign countries seen as most likely to default on debt and unable to honor its debt obligations. In the report “Sovereign Risk Report for Q4 2010″ released by world’s leading   credit default swap (CDS) pricing service, CMA of London, Greece is followed by Venezuela, Ireland and Portugal.

CMA’s Sovereign Debt Credit Risk Report names the best and worst performers for the fourth quarter 2010, in which it names the top ten most and least risky sovereigns.

Bad performances for some  PIIGS

Greece topped a list of countries seen as most likely to default on debt and pipped Venezuela as the world’s riskiest sovereign. 

Greek five-year credit default swaps (CDS) were quoted at 1,026.5 basis points at year-end, meaning it cost just over $1 million to insure exposure to $10 million of Greek debt over a five-year period. The CDS rose 32 percent in the fourth quarter of 2010.

Last May, Greece received a 110 billion euro IMF/ECB/EU bailout, becoming the first country within the euro zone to be loaned.

Ireland and Portugal rose higher and got the 3rd and 4th places respectively, followed by Argentina and Ukraine.

Spain also joined the ranks of the riskiest sovereign debtors in the fourth quarter of 2010 and it is followed by Dubai, Hungary and Iraq.

CMA’s Top Best

In the list of 10 least risky souvereings, Norway leads followed by Finland and Sweden.

Interesting enough, Germany‘s debt risk brought the strongest economy within the euro zone at the 9th place – down by four notches.

The rankings are based on CMA’s calculations, which include the cumulative probability of default quantifies the probability of a country being unable to honour its debt obligations over a given period of time. For Sovereign CDS, this typically includes the probability of a restructuring of debt.

The data, normally collected  by 35 CDS buy-side firms, for the fourth Quarter of 2010 show that “the top five worst performers are from Western Europe, confirmation that 2010 was one of the most difficult years for the region since the introduction of the euro in 1999″, comments CMA in a Press Release.

See Full CMA-report here