Greece’s default is gradually being acknowledged by international rating agencies and world financial institutions. Yesterday, Standard&Poor’s cut the country’s rating from “CCC”, or “currently vulnerable and dependent on favorable conditions to meet its financial commitments, to “SD”, or “selective default”.

The International Swaps and Derivatives Association (ISDA) is widely expected to follow suit. The move came in response to the Greek government’s approval of retroactive insertion of collective action clauses (CACs) as of this week as part of a bond swap deal to exchange distressed bonds for new ones. If two-thirds of foreign bondholders accept the proposed terms, the rest will also have to accept them.

Denis Barabanov, chief analyst with Russia’s Grandis Capital investment company, believes that S&P was somewhat late in admitting what had already taken place the moment a debt restructuring plan for Greece was announced. With efforts to correct the situation well underway, S&P has hinted that it may return Greece its “CCC” rating, which it is likely to do.

"Greece will regain its “CCC” rating because the default actually took place a long time ago and debt restructuring is already in progress, something the investors grudgingly have accepted. No official default was announced, but everything was readied and the recovery process was launched. The question is whether Greece will be able to get back on its feet."

The European Union has made clear it won’t let Greece down. The European Central Bank will provide emergency liquidity assistance (ELA) for those Greek banks that will fail to attract capital from private investors. The ECB has a similar ELA program for foreign banks that have Greek bonds in their portfolios. Alexei Logvin, chief economist at the Rus Capital management company, takes a look at the matter:

"A huge amount of money, around 470 billion euro, will be placed at pretty low interest rates for a fairly long term – three years. This mechanism is designed to compensate the European countries for the losses incurred from the Greek debt problem, reset the economy, ensure economic growth for the coming years, and thus alleviate debt concerns."

Denis Barabanov notes that the stubbornness with which the EU is trying to rescue Greece could eventually harm the Greek economy.

"They have been rather consistently pressing Greece to cut spending. As a result, Greek labor force and Greek goods will become cheaper. Perhaps, the country’s GDP will start showing signs of growth in a few years. But, in my opinion, it’s a dead end. This situation will persist for a while, and in a few years preparations for pulling Greece out of the eurozone will begin. I just don’t see what else could save Greece."

So far, Greece remains part of the eurozone. European politicians and economists fear Greece’s withdrawal could set a dangerous precedent for other eurozone economies. That could mean a collapse of the eurozone.