Given that the category “Selective Default” (SD) exists only in the terminology of Standard and Poors, if Greece defaults in some of its obligations, what are the other rating agencies going to call it?
According to their definitions this event will be called “Default” (D), and it does not matter if it happens in some or all of the sovereign entity’s debt. This is the definition of default we all know and we all teach. If there is a failure to pay an obligation, this is recorded as Default. This is what also every each one of us faces if we miss a payment of our credit card or of any other obligation we have. It is recorded in our credit record as a Default event and we lose points.
I am amazed, for one more time, by the discussion that is taking place in Greece the last few days, regarding the meaning of the term “Selective Default”. As always, in Greece they want to convince us that black is white. Of course we all understand why they do this; they need to calm and confuse the public, by playing with the words, because it is hard to sell the unfair measures they take, when, even though they do take them, they also have to default.
It was always clear, even before 2009, that Greece would need to default, sooner or later, on all or part of its debt. Anyone who was/is objective could call it. For this reason the current soap opera we see in the news every night is not interesting at all.
