Eurozone leaders agreed a deal to help Greece last month, but a leading ratings agency has downgraded Greece's credit rating amid growing fears the country is struggling to overcome its debt problems. Fitch cut Greece's rating by two notches, from BBB+ to BBB-, as the cost of Greek borrowing continues to rise. The downgrade comes as leading investors call for Greece to seek financial help from the EU and the International Monetary Fund (IMF). But Greece reiterated it did not plan to call on its EU partners for help. Despite this, Fitch said that "external financial support is likely to be forthcoming", and called on the IMF to give more specific details of a rescue plan in order to calm investors' nerves. Greece now has the same credit rating as Brazil, Panama, Morocco and Namibia.
Despite this, Fitch said that "external financial support is likely to be forthcoming", and called on the IMF to give more specific details of a rescue plan in order to calm investors' nerves.
Greece now has the same credit rating as Brazil, Panama, Morocco and Namibia.
Now if the euro was a company, the Greek division would be closed or sold off. The product line had not lived up to expectations. It was important therefore to protect the core business. Other weaker divisions might have to go too.
The BBB- rating is significant, as this is the lowest rating that qualifies as an investment grade bond. Any further downgrade would mean Greece losing its investment grade status with Fitch.
If the two other major credit rating agencies, Standard & Poor's and Moody's, were to follow Fitch's lead, then a lot of big institutional fund managers, such as pension funds, would not be allowed to invest in Greek debt.
Greece is currently rated BBB+ by Standard & Poor's and A2 by Moody's.
The Greek government currently plans to fix its finances through austerity measures and borrowing.
But investors say a bail-out is now increasingly likely as the loss of investor confidence on the bond markets this week has increased Greece's cost of borrowing.
"Now is the time to put some money on the table," John Stopford, co-head of fixed income at Investec, told the BBC.
"We are getting down to two options - an IMF package of financial support or organised debt restructuring."
His comments were echoed by Alistair Newton, strategist at Nomura Securities, who said it was "increasingly likely" that the Greek government would ask for a rescue from the EU and IMF.
A bail-out was likely to come before the end of May, he told the BBC.
The current volatility in the money markets would continue until that happened, he said, making Greece's current strategy of borrowing its way out of trouble unfeasible.
On Thursday, the difference between interest rates charged by investors to the Greek government compared with Germany - seen as the safest of the European economies - rose to its highest level since the introduction of the euro. However, the gap has since fallen back slightly.
Last month, the EU and IMF announced plans to provide a 22bn-euro (£20bn; $29.5bn) safety net that could be drawn on should Greece be unable to raise the funds it needs on the financial markets. The Greek government has so far sought to avoid taking any money, and the lack of detail in the bail-out plan has also worried investors.
But despite saying his country does not currently plan to use the safety net, Greek Finance Minister George Papaconstantinou said that details of how the rescue plan could work were being hammered out.
"In the last few days, there has been, as scheduled, a detailing of this mechanism - in other words exactly how it would work," he said.
09.04.2010
