When it comes to credit worthiness, Greece suddenly finds itself in a very lonely place.
"CCC" is the label rating agency Standard & Poor's slapped on the country Monday night, dropping it to rank 131 of 131 states that have a sovereign debt rating. That suggests Greece's creditors are less likely to get their money back than those of Pakistan, Ecuador or Jamaica.
It's an astonishing low for Greece. As recently as January 2009, the country still had a stellar A rating despite a hefty debt burden. Becoming a member of the euro club in 2001 was meant to insulate Greece from its precarious financial history, which has seen it in default for much of the time since independence in 1829.
Now, Europe's top financial officials are debating whether they are going to hand Greece more money in addition to last year's euro110 billion ($159 billion) bailout. Without another cash injection, the country won't be able to pay its creditors and a default will become inevitable.
"I believe that we will all agree on an aid package for Greece, under strict conditions," Luxembourg Finance Minister Luc Frieden said Tuesday night, after a meeting with his European counterparts in Brussels.
But this time around, the rescue may be a little different. A new package of rescue loans for the country will only come if banks and investment funds share a substantial part of the burden, rich countries like Germany and the Netherlands insist.
That's a fundamental change of approach from just a year ago. The knee-jerk response from EU ministers until recently was that banks would be spared the cost of bailing out euro countries, partly for fear of damage to their balance sheets, which have only just been repaired following the financial crisis and subsequent recession.
Ratings agency S&P says getting the private sector to share the burden could see Greece downgraded to an "SD" rating, or selected default. That's a rating that's never been held by any country while part of the European Union and which the European Central Bank warns could spread panic on financial markets, pummel Greek banks and drag down other struggling countries like Portugal, Ireland or Spain.
At their get-together in Brussels, ministers did not reach a deal on how to involve private creditors in a new bailout for Greece without triggering a default, but Frieden stressed that any approach would have to prevent the crisis from spreading any further.
"One always has to be aware that some things can be beneficial in the short-run but have devastating consequences in the long run," he told reporters, adding that ministers hoped to reach a final deal within the next two weeks.
Other commentators, however, questioned whether a partial default by Greece would really have such terrible consequences, with Greek bonds trading far below their original prices.
"The question is, to what extent does it matter that on the website of Standard & Poor's there is a note that says 'we think that Greece is in selected default'?," said Daniel Gros, director of the Centre for European Policy Studies in Brussels and a former economist at the International Monetary Fund. "Is that, in the end, so terrible that we have to avoid it at all cost?"
Gros believes that the debate about private-creditor involvement may be an opportunity to test market reaction to the bigger question: a full default that forces banks and investment funds to cut the total amount of money they are owed by Greece, rather than just giving the country more time to repay.
"It would basically be a first step and if the first step doesn't cause pandemonium then maybe the way is free for a more intelligent restructuring," he said.
Under such a restructuring, which has consistently been ruled out by European policymakers, investors will likely get only 30 percent to 50 percent of their money back, S&P estimated.
No one disputes that Greece is in deep trouble.
Its debt will reach some 160 percent of economic output by the end of this year, unemployment is above 16 percent and its economy is expected to shrink 3.7 percent this year, following a 4.5 percent contraction in 2010.
The problem is that as its economy contracts, the debt burden increases as a percentage of national income. Austerity measures that are meant to make its economy more competitive are in the short-term hurting much-needed growth. And though the country's current debt ratio is lower than others _ Japan's, for example _ Athens mainly owes money to overseas investors.
Greece's task is difficult enough. Debt crises of the type Greece is experiencing often end up in default, partly because there comes a point when the pain is just too much to bear.
Investors currently demand interest rates of close to 17.5 percent for Greece's 10-year bonds, which is why the country remains effectively locked out of international debt markets, relying on other eurozone countries and the IMF to pay its bills.
Between now and 2014, Greece has to repay some euro153 billion in debt, S&P estimated Monday, far above the euro53 billion still left over in the existing bailout package. The voluntary private creditor involvement would likely only make a small dent in the total amount of new money required, possibly some euro10 billion, Gros said.
As well as French and German banks being exposed to Greek debt, U.S. companies are in the firing line too, since they are the ones selling most default insurance policies.
"This is why there is a risk of a 'Lehman moment' in the eurozone debt and banking crisis," said Neil MacKinnon, global macro strategist at VTB Capital.
Pan Pylas in London contributed to this report.