by Richard Barley
Wall Street Journal
May 20, 2011
It's not often that a ratings downgrade could actually be positive for an issuer's bonds. Yet Fitch's latest downgrade of Greece is the closest Athens has come to good news from a ratings agency since the start of the euro-zone crisis.
Fitch Friday lopped three notches off Greece's rating to B-plus. The action was motivated by the scale of the problems confronting Greece, concern over the ability of the government to hit 2011's deficit target of 7.5% of gross domestic product and doubts about the feasibility of the €50 billion ($71.56 billion) privatization program. So far, so ordinary.
But Fitch also said it expects the European Union and International Monetary Fund to provide "substantial" new money for Greece and that there will be no "re-profiling" of Greek debt. The agency said it believes Athens "remains committed to the program and to honoring its sovereign debt obligations." It warned a maturity extension would be a default that could hit financial stability across the euro zone.
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