Credit agency Standard & Poor's has downgraded Greek debt three notches to CCC - a rating that means it considers Greece to be "currently vulnerable and dependent on favorable economic conditions to meet its commitments."

The hefty downgrade puts Greece into the broader category of non-investment grade credit considered too risky to be a good financial bet. It leaves Greece as the country with the lowest credit rating in the world.

"The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece," said the rating agency.

It said its estimate of a 30 to 50 percent recovery upon default remained unchanged.

"In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece's official creditors, would result in one or more defaults under our criteria," said S&P's Mark Tierney.

Measures ignored

The government of Giorgos Papandreou has pushed through reforms and cuts

Greece's Finance Ministry reacted indignantly to the downgrade, accusing S&P of ignoring the government's austerity budget and reform efforts, and its coordination with the European Union and the International Monetary Fund on new financial aid.

"This decision overlooks actions by the government to preclude any problems in Greece's contractual obligations," the Finance Ministry said,

But Standard & Poor's said it believed that Greece's recession "could well persist into 2012 and thus may further erode internal political support for the revised EU/IMF program."

The three-band downgrade is seen as a warning shot aimed at the political drive to restructure Greek debt. The German-endorsed plan would call on private investors to waive some of the profits they would stand to make from Greek debt for as much as seven years.

The move by the ratings agency came ahead of a Tuesday meeting of eurozone finance ministers in Brussels to discuss Greece's future.

Author: Darren Mara (AFP, Reuters)

Editor: Michael Lawton