Third rating warning in a month
Fitch became the third major credit rating agency to put Greece on review for a possible downgrade this month as the country’s economy moves deeper into recession. A downgrade by Fitch would push Greece’s ratings into junk territory, from BBB- currently, the lowest investment-grade level. The news sent the euro lower against the US dollar on renewed concerns about the scope of the European sovereign debt crisis. In a statement, Fitch said yesterday it was placing Greece’s BBB- long-term foreign and local currency issuer default ratings on rating watch negative pending the outcome of a rating review. The negative rating watch indicates there is a heightened probability that Greece’s sovereign ratings will be downgraded, it said. Fitch said the review, expected to be completed during January, «will focus on an assessment of Greece’s fiscal sustainability in the wake of the measures that the authorities have taken this year under the IMF-EU program.» In May, Greece had to seek a 110-billion-euro bailout from the European Union and International Monetary Fund after financial markets turned against the country and it was no longer able to raise fresh funds at sustainable rates of interest. Fitch said the review would also take into account «the outlook for the Greek economy and also the political will and capacity of the Greek state to carry [out] the measures required by the IMF-EU program through to a successful conclusion.» The BBB- rating by Fitch means it is still considered investment grade, but this is the lowest level before it would be regarded as «junk» – a speculative rating. Moody’s Investors Service and Standard & Poor’s Ratings Services both warned of potential downgrades for Greece earlier this month, reflecting uncertainty about the country’s ability to reduce its debt to sustainable levels, a substantial projected budget shortfall and the assessment of an EU treaty that would result in a permanent crisis trigger in which the European Stability Mechanism would rank ahead of private creditors in debt restructurings starting in 2013.
