May 10, 2011
Credit ratings agencies hammered Greece on Monday after senior euro zone policymakers acknowledged that Athens will need a second bailout package soon to avert a disorderly overhaul of its debt obligations.
Officials said the European Union was also looking to lower interest rates on rescue loans to Ireland within weeks and eyeing easier bailout terms for Greece as the common currency area floundered deeper into crisis.
But ratings agency Standard & Poor's suggested far more radical measures would be required to make Greece's 327 billion euros ($470 billion) debt mountain sustainable, saying Athens may have to reduce the face value of its bonds by up to 70 percent, implying big losses for investors.
S&P downgraded Greece's credit rating further into junk territory to B, just one notch above Pakistan's, hitting Greek bank stocks as investors sought safety in German bonds. The euro slid to its lowest level in three weeks against the dollar.
Moody's Investor Service threatened to downgrade Greece by several notches, placing Athens' B1 sovereign rating on review due to increased worries that it might seek to impose losses on private bondholders.
Fitch Ratings said it still rated Greece at BB+ with a negative outlook and would not comment on a report in German newspaper Sueddeutsche Zeitung that it planned to downgrade Greece's rating to B or B- this week.
The executive European Commission said it hoped for a decision within weeks on reducing the interest rate charged to Ireland to make Dublin's debt more sustainable.
"The Commission is clearly in favor of a rate cut," a spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn said. "The Commission is against debt restructuring."
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