May 20, 2011
Fitch Ratings just cut Greece’s debt rating to B+ from BB+ and put the rating on “rating watch negative.”
Saith Fitch:
The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform programme necessary to secure solvency of the state and the foundations for sustained economic recovery. Implementation and political risk have risen as further fiscal austerity measures are required to realise the 2011 budget deficit goal of 7.5% of GDP due to the under-performance of tax receipts and higher deficit outturn for 2010 than originally targeted.
Moreover, the greater emphasis on privatisation has heightened the risk that the policy conditional funding under the EU-IMF programme will be delayed given the political and technical obstacles to the realisation of EUR50bn of asset sales. Nonetheless, Fitch does expect some assets sales by year-end, albeit relatively modest, and continues to believe that the Greek government remains committed to the programme and to honouring its sovereign debt obligations.
The ‘B+’ rating incorporates Fitch’s expectation that substantial new money will be provided to Greece by the EU and IMF and that Greek sovereign bonds will not be subject to a ‘soft restructuring’ or ‘re-profiling’ that would trigger a ’credit event’ and default rating from Fitch.
So, Fitch doesn’t expect a “soft restructuring,” which is basically just giving Greece more time to pay debt. That doesn’t usually fly so well with your local loan shark, and it doesn’t fly with bondholders, either.
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Ρεπορτάζ στο Βήμα, την Καθημερινή και τα Νέα
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