No deal, no money. No money, most probably no payment to the IMF. No payment to the International Monetary Fund could result into a “credit event” for Greece. But the debt-ridden country has additional financial obligations to meet in July and August. It has to repay €6.7billion for bonds held by the European Central Bank, maturing end of July. Another opportunity for Greek “default”?
Ratings agency Standard & Poor’s said Monday that it would not consider Greece to be in default even it failed to repay 6.7 billion euros due in July and August to the European Central Bank.
“That’s because our sovereign ratings pertain to a central government’s ability and willingness to service financial obligations to commercial creditors, and we consider the ECB to be an official creditor,” it said in a statement.
Although S&P would not downgrade Greece’s rating to ‘selective default’ in the event that Athens failed to pay, the agency said it may still cut the grade to a lower level than the current ‘CCC’ rating. It said “nonpayment would be seen as a negative factor and could lead to a lower long-term rating than the current CCC rating but it would not constitute selective default (SD).”
Hmm, so S & P are working hard to keep the dream going.
Downgrading Greece to -CCC in these circumstances is immaterial.
Also, there would be no immediate stop of the ELA, as you can watch Mr Draghi’s Q&A with European Parliament members here: http://ec.europa.eu/avservices/video/player.cfm?ref=I104542, you can even change the language.
From 87:10 he says with regards to a possible Greek default:
“We know by the words of the Greek leaders that these payments will be met fully and timely.”
Afterwards about the ELA decision process:
“A national central bank presents its request to be authorized and the Governing Council may only object with a two thirds majority.”
I’m honestly pretty impressed how well we Europeans are governed, how well the institutions are designed and how transparent and democratic the decision processes are. We Europeans will get out of this crisis stronger than ever before.
Greece has Nothing to Lose by Saying No to Creditors
Wolfgang Münchau for subscribers of Financial Times, but rebloged in Global Economic Analysis.