EU Rescue Effort Prompts Default Warning From S&P on Greece

Europe’s effort to pull Greece back from the brink may result in a default rating by Standard & Poor’s, exposing a critical flaw in the drive to press creditors to assume a share of the bailout cost.

Standard & Poor’s said today a rollover plan serving as the basis for talks between investors and governments would qualify as a distressed exchange and prompt a “selective default” grade. That may leave the bondholders unwilling to complete the transaction and the European Central Bank unable to accept Greek government debt as collateral, impairing the lifeline it has provided the country’s banks.