Bloomberg
May 20, 2011
Greece’s credit rating was cut three levels by Fitch Ratings, which said that even a voluntary extension of its bond maturities being studied by European Union policy makers would be considered a default.
Fitch cut its rating to B+, four levels below investment grade, from BB+ and said that the country could face a further reduction in its creditworthiness. The yield on Greek 10-year bonds rose 57 basis points to 16.6 percent, more than twice the level of a year ago when Greece accepted an EU-led bailout.
“The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state and the foundations for sustained economic recovery, Fitch said in an e- mailed statement.
More than a year after Greece received a 110 billion-euro ($156 billion) aid package that aimed to stem the spread of the region’s sovereign crisis, the nation’s debt is rising, borrowing costs are near records and European policy makers are considering additional aid. Ireland and Portugal followed Greece in seeking bailouts as investors shunned the debt of the region’s other high-deficit nations.
Greece’s two-year bonds yield more than 25 percent, indicating investors are betting Greece won’t be able to return to markets as planned under the bailout next year, when it’s due to sell about 27 billion euros of bonds.
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