Credit rating agency Moody's has cut Greece's rating, warning that a planned debt swap would constitute a default.
The rating was cut another three notches from Caa1 to Ca - just two more notches shy of a default rating.
"The announced EU programme... implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%," the agency said.
The debt swap would increase Greece's borrowing terms by up to 30 years.
However, a statement last week from the Institute of International Finance - a trade body representing global banks and other major lenders - conceded that the debt deal would cost private sector creditors an estimated 21% of the value of the Greek debts they currently hold.
It comes after another rating agency, Fitch, warned that it too expected the deal would mark a "selective" debt default by Athens.
The debt exchange with private sector lenders is part of a comprehensive package announced on Thursday by European leaders to shore up the euro and prevent the Greek debt crisis from spreading to other economies, notably Spain and Italy.
'Developing' outlook
Despite Moody's view that the debt swap deal would constitute a default, the agency was generally upbeat about Greece's longer-term prospects.
"Looking further ahead, the EU programme and proposed debt exchanges will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden," it said.
As well as the private sector debt swap deal, European leaders also agreed last week to lengthen the repayment terms on existing bail-out loans, and lower the interest rate they were charging.
"The support package for Greece also benefits all euro area sovereigns by containing the severe near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt," said Moody's.
The ratings agency also warned that Greece "will still face very significant implementation risks to fiscal and economic reform".
Austerity measures demanded by Greece's European partners and the International Monetary Fund remain highly unpopular among many of the country's voters, and face continuing street protests.
Unusually, Moody's assigned the rating a "developing" outlook, instead of the more typical "positive" or "negative" outlooks.
