In Brief
Fitch says plans cannot be taken for granted The implementation of Greece’s deficit-cutting plans cannot be taken for granted and the first signs of dissent in the Cabinet are starting to appear, Fitch Ratings director Christopher Pryce said. Greece presented a «convincing» budget last month, Pryce said at a conference in London yesterday, and the Greek outlook is «probably OK» in the short term. Prospects in the next six to nine months are less certain and Fitch has more confidence in the Irish government than in the Greek administration, he said. Fitch rates Greece BBB+, the third-lowest investment grade, with a negative outlook, after paring it one step from A- on December 8. «I think we can say that public opinion is surprisingly supportive, but there are clearly mutterings behind the scenes and there are already clearly the beginnings of dissent within the Greek Cabinet,» Pryce said. Concern that Greece may need a bailout from its European partners has weakened the euro and doubled the premium investors demand to buy its debt over comparable German bonds. (Bloomberg) Commission becomes more vigilant after crisis The Greek deficit crisis is likely to heighten the European Commission’s vigilance in approving the entry of new members into the euro region, Poland’s central bank Governor Slawomir Skrzypek said. «The latest experiences with countries like Greece show that fulfilling the Maastricht criteria is necessary before» entering ERM-2, the pre-adoption test of currency stability, Skrzypek said in an e-mailed response to questions from Bloomberg. «This case could induce the European Commission to be more cautious in making decisions.» Poland, the European Union’s largest eastern economy, was forced to abandon its 2012 euro adoption target after the deficit swelled to more than double the EU’s 3 percent of gross domestic product limit last year. The government plans to narrow the shortfall to the target in two years, though some policymakers say that isn’t necessary for joining the exchange rate mechanism. (Bloomberg) German banks Fitch Ratings said yesterday that German banks’ exposure to Greece would result in only a limited number of potential rating changes even in the unlikely scenario that Greece were to default. Fitch does not have any of the German banks on review for potential downgrade because of their Greek exposure. Serbian risk The head of the Serbian central bank warned yesterday that if Serbia continued to base its economic growth on excessive domestic consumption, it could suffer a «Greek scenario.» «Public consumption will be the biggest challenge in 2010, in other words, how much wages and pensions will be determined by politics and to what extent they will depend on economic trends,» Radovan Jelasic was quoted by Tanjug news agency as telling an annual meeting of businessmen and economists in central Serbia. Jelasic said Serbia had a problem of weakening domestic demand but added that «the solution should not be to increase domestic consumption – because there is no money for that – but public investment.» (AFP)
