Latest Greece Downgrade Brings Country in Line With Belarus

"The downgrade reflects our view of increasing sentiment among Greece's key euro-zone official creditors to extend the debt payment maturities of their 80 billion euros ($115 billion) of bilateral loans pooled by the European Commission," S&P said in an e-mailed statement to Bloomberg. "As part of such an extension, we believe the euro-zone creditor governments would likely seek 'comparability of treatment' from commercial creditors in the form of their similarly extending bond and loan maturities."

A year after Greece received a 110 billion-euro aid package that aimed to stem the spread of the region's sovereign crisis, the nation's debt was rising as it faced record borrowing costs. Two-year bonds yield more than 25%, indicating investors are betting Greece won't be able to return to markets as planned under the bailout next year, when it was due to sell 25 billion euros to 30 billion euros of bonds.

Bloomberg notes the difference in yield between Greece's benchmark 10-year bond and comparable German debt increased 27 basis points to 12.6 percentage points on Monday and the cost of insuring its debt against default reached a record 1,375 basis points.

Greece missed its deficit target for last year, reporting a shortfall of 10.5%, versus a target of 9.6%. Achieving 2011 targets "is uncertain" and the government "may see a restructuring of official and commercial debt as the best way forward," S&P said.