Greece's default on its loans is almost assured, multiple news agencies reported today.
The Greek default is predicted to further kill faith in the economic fitness of the euro zone, especially in countries with similar circumstances of huge debt and heavy unemployment, such as Spain and Italy.
Moody’s Investors Service again downgraded Greece’s credit standing Monday, as a newly approved EU rescue plan — a combined $150 billion in new loans — was put in place to stem the damage, the Washington Post reported.
"The announced EU programme implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," Moody's said. "[Greece's] stock of debt will still be well in excess of 100 percent of its GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," the Guardian reported Moody's saying.
In the first review by a ratings agency of the plan approved by European leaders last week, Moody’s cast doubt on the long-term impact on the conditions under which heavily indebted euro zone countries will be able to borrow money to stop the contagion.
"Now that the 17-nation euro zone has shown it is open to a default," Moody’s said, "it is more likely that other nations might try to follow suit," the Washington Post reported.
European officials have tried to anticipate that possibility, and declared last week that the new program for Greece won’t be repeated for other countries.
Greece's existing $160 billion rescue plan ran off the rails with a worse-than-expected recession and slower-than-expected economic reform.
The more than $400 billion in outstanding loans is the equivalent of 150 percent of the country’s annual economic output. Greece’s economy is still slowing and unemployment has reached over 16 percent.