Greece on Monday became the country with the lowest credit rating in the world after Standard & Poor's downgraded it by three notches, saying the agency would consider a likely debt restructuring as a default.

A restructuring of Greece's debt -- either with a bond swap or by extending maturities on existing bonds -- looks increasingly likely to be imposed by European policymakers as a means of sharing the burden of Greece's crisis with the private sector, S&P said in a statement.

In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default according to Standard & Poor's published criteria, the agency said.

In such a case, S&P added, Greece's credit rating would be lowered to selective default, or SD, while the ratings on the country's debt instruments would be cut to D.

S&P cut Greece's long-term sovereign credit ratings to CCC, just four steps away from default, from B. The short-term rating was affirmed at C and all the ratings were removed from credit watch.

The outlook on the long-term rating remains negative, however, in a sign that another downgrade is likely in the next 12 to 18 months.

(Reporting by Walter Brandimarte; Editing by Dan Grebler)