The European Central Bank has temporarily suspended Greek debt being used as loan collateral after Standard & Poor’s cut Greece’s credit rating to “selective default.”

­The agency says the downgrade follows the Collective Action Clause (CAC) the Greek Parliament attached to the bond swap deal with private investors.

The bond swap begins on Friday and is due to wipe Ђ107 billion off the country’s privately-held obligations through exchange of bonds to those with less value and longer maturity. The CAC means once the majority of the investors sign up to the deal, it will become obligatory for the rest.

Experts say, S&P prepared its analysis months ago, but it has been waiting for the moment Greece finalised the terms of bond swap deal with private investors to cut the rating.

“In my opinion S&P did exactly what markets expected S&P to do and what markets are actually doing,” said Margaret Bogenrief CEO of ACM Professional Services. “It only waited for the i’s to be dotted and all the fingers crossed on the agreement with private creditors.”

The deal is part of the conditions put forward by the EU in exchange for Ђ130 billion of rescue loans, without which Greece will not be able to service its debt in March and will have had to go for an unstructured default.

Greek private lenders hold about Ђ200 billion in bonds, and the swap will bring a real loss of 74 percent of their investment.

Once the bond swap is concluded, the agency is likely raise Greece's sovereign credit rating to the “CCC” category – which is still “junk” status.

Ms Bogenrief considers Greece’s expulsion from the euro-zone as inevitable and calls investors to watch closely other debt-troubled countries. “I think we should start looking at the countries like Ireland, Portugal and Spain”, she said. “Ireland is particularly interesting case to look at. They were in a very similar position a few years ago and they were able to play by the rules.”

“What does signify is that the EU will take a different economical and political shape in the next half decade,” Ms Bogenrief added.

Last week another American rating agency, Fitch, cut Greece's long-term ratings to its lowest rating above a default, because of the expected bond deal with private investors.