Markets may be moving to the rhythm of rumors regarding the restructuring of Greek government debt, but credit agency Fitch does not agree with those that argue Greece should follow this strategy.
Even though Fitch recognizes that there is growing market pressure on the Mediterranean country, it believes Greece would be better off if the pressure led to the provision of another rescue package to Athens with the support of the European Union.
In the event of a haircut, the government would also need to provide more money to help prop up its banking system.
Paul Rawkins, a senior director at Fitch Ratings, told Kathimerini that ?it appears increasingly unlikely that Greece will return to the market in 2012, a development which pressures the country?s formal creditors to provide more capital. Despite the political commotion supporting the opposite of this, this could be the least worst solution. It has the advantage of pushing back the problem until the start of the European Union?s Stability Mechanism in 2013.?
Commenting on the medium-term strategy recently announced by Prime Minister George Papandreou, Rawkins said that achieving 50 billion euros in privatization revenues in such a short period of time is a very ambitious task.
?At 20 percent of gross domestic product, the Greek privatization program is very ambitious and does not appear to be able to raise sufficient funds in order to cover the funding shortfall, which is likely to arise in 2012 and 2013,? he said.
As Fitch considers it likely that Greece will suffer a funding gap, it is continually examining the course of budgetary goals as set out in the government?s program.
Rawkins noted that there are three factors that could trigger a further downgrade of Greece?s sovereign debt rating.
As he points out, ?a lack of clarity from European Union officials on additional help towards Greece could lead to a further downgrade of Greece?s credit rating. The same applies for missed fiscal targets that would increase the Greek economy?s funding needs or whether the economy does not show any signs of stabilizing and rebounding in the second half of 2011.?