Greek debt crisis: ratings agency raises default fears over bonds

Guardian
June 21, 2011

Europe's hopes of preventing Greece defaulting on its debts were knocked on Tuesday as ratings agency Fitch declared that it will declare the country to be in default if commercial banks agree to roll their loans over, as EU finance ministers are planning.

European leaders, led by France and the European Central Bank, argue that Greek lenders could choose to buy new, longer maturing bonds when their existing debts mature, as part of a second Greek rescue package. They say that lenders would be under no compulsion to make the swap, rather than cashing the bond in, so Greece would not be defaulting on its debts. Fitch, though, refuses to accept this.

"Fitch would regard such a debt exchange or voluntary debt rollover as a default event and would lead to the assignment of a default rating to Greece," Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, told a conference in Singapore early on Tuesday.

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