Standard & Poor’s has slashed Greece’s long-term sovereign credit rating to CCC, with a warning that it could yet be reduced further to ‘selective default’ or SD.

Greece has been told by the ratings agency that any restructure of the country’s debt would be automatically marked as a default and the country’s rating would be lowered still further.

Neil Wicks, fixed interest fund manager at NFU Mutual, said the impact on Greece’s ten-year government bonds has already filtered through, with the interest rate now at 16.7 per cent.

He explained, ‘It has been coming for a while. The only downgrade left is to go to default. That will be key to the markets. More than likely, Greece is going to default.’

Wicks said if this does happen, another wave of activity will begin from holders of credit default swaps (CDS) – which are bought to protect investors against the issuers defaulting.

He added, ‘A lot of people have bought CDS protection of Greek bonds. If it is a technical default that will have to be unwound. There are very clear technical definitions of what constitutes a default.

‘Then it is a case of finding which institutions have reasonable Greece exposure. Quite a few US banks and German banks have exposure, although it is not as bad in the UK - most of our exposure is towards Ireland.

‘For the US banks, there is reasonable exposure, but it won’t make a huge impact. It will be felt more in Europe than in the US, particular the German banks.’

Despite this, Wicks said that Greece is unlikely to quite the Euro anytime soon, due to the wider implications.

He explained, ‘It might be best for Greece to leave the Euro so they can have a floating currency but the worry will be if Greece leaves the Euro, then Spain, Portugal and Ireland might say the same. In reality, I imaging they will be kept in.’

Moody’s rating of CAA1 and Fitch’s rating of B+ are both higher than that awarded by S&P today.

Analysts are predicting that further downgrades will follow after today’s announcement and S&P has confirmed that another downgrade is very likely in the next 18 months.

Greek banking stocks are also likely to be impacted with further downgrades probable. These are predicted to affect EFG Eurobank, Alpha Bank and Piraeus Bank, among others.