The head of Moody's sovereign ratings group said on Tuesday it was hard to see how a private sector rollover of Greek debt would be truly voluntary and it would therefore likely constitute a default.
European officials are striving to arrange a private sector rollover as a key part of a new rescue plan for Greece, to help justify to their taxpayers the burden of fresh financial aid for the struggling euro zone member.
Bart Oosterveld, head of the sovereign risk group at Moody's Investors Service, said the ratings agency could classify a debt rollover as a default if it believed that bondholders had only taken part because they feared the consequences of not participating.
It's hard to imagine in the current circumstances that people would voluntarily do this, he told reporters in Paris.
Our default definition contemplates that for something to be voluntary it has to be truly voluntary ... More likely than not this would be a credit event in our view.
Oosterveld, who is based in New York, said there was a big difference between Greece's current situation and 2009's Vienna Initiative for eastern Europe, when international banks agreed to keep credit lines open to subsidiaries in Romania, Latvia, Hungary and Serbia.
The thing about Greece is that it is so late in the game, Oosterveld said, noting there was now a clear risk of a Greek default looming over investors, unlike when the Vienna Initiative was agreed. It's hard to imagine anyone doing anything voluntarily right now.
Moody's assigns a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.
Oosterveld said Moody's saw the default risk increasing among troubled euro zone periphery countries, sometimes from a very low base, sometimes from a high base.
However, he noted that the combined debt of these economies made up only 13.5 percent of the region's economy.
The euro zone governments and the European Central Bank have the resources and the incentives to contain (this), especially short-term financial pressures, he said.
MARKETS TO STAY STRESSED
While the market was hoping for a bold resolution of the Greek crisis, policy constraints in euro zone member states including Greece itself were forcing incremental steps.
It is more likely than not that markets are going to remain volatile and stressed for some time, Oosterveld said, adding that it was impossible to foresee a Greek restructuring that would alleviate the situation and at the same time be orderly.
To have any impact on Greece's debt, which totals around 340 billion euros or 150 percent of the country's GDP, any restructuring would have to be large and therefore disorderly, with an impact on Greek banks and the European Central Bank's balance sheet, Oosterveld said.
Cyprus' banking system and its sovereign rating would also be hit because of its intimate ties to Greece, although the impact of a haircut of 50 percent on Greek debt would be manageable for banks in Germany and France, he said.
A 50 percent haircut had been roughly the average in recent sovereign defaults, Oosterveld noted.
In this sense, he said, the introduction of collective action clauses on euro zone debt from 2013 would not represent a watershed, because to have an impact any restructuring would have to include debt issued before that date.
(Reporting by Daniel Flynn; Editing by Catherine Evans)