Additional Financial Support Beyond 2013 Needed to Restore Greek Solvency

Seeking Alpha
June 2, 2011

Restoring Greece to solvency will require additional financial support beyond the end of the current EUR110bn program expiring in in 2013, says Fitch Ratings.

Following its downgrade of Greece’s sovereign ratings from ‘BB+’ to ‘B+’ and the placement of the ratings on Rating Watch Negative (RWN) on 20 May 2011, Fitch has published a special report further examining the factors behind the rating action.

Fitch remains of the opinion that only the combination of sustained economic recovery and fiscal consolidation, and structural reform offer a credible path to the restoration of sovereign creditworthiness for Greece. However, the scale of the challenge before the Greek authorities, including a new commitment to privatise EUR50bn of state assets by 2015, and their ability to deliver in the face of rising implementation and political risk is increasingly in doubt.

In Fitch’s view, the outcome of the EU Heads of Government Summit on 24-25 March raised market expectations of the inevitability of some form of debt restructuring under the auspices of the newly created European Stabilisation Mechanism.

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