Ratings agencies warn against German plan
Published 16/06/2011 | 05:00
RATINGS agencies weighed into the debate on whether to force burden-sharing on lenders to Greece, as European political leaders remained at loggerheads on the issue. European officials are at odds over how to include a role for private-sector bond holders in a new Greek bailout.
Last night, two agencies released opinions that seem designed to warn ministers away from Germany's preference, saying it will push Greece into default.
Ratings agency Fitch said Greece could avoid a technical default if banks agreed to a 'Vienna Initiative' roll over of debt.
The Vienna Initiative is the ECB's preference of not imposing a comprehensive debt deal on Greece but relying on banks to "do the right thing" by rolling Greek bonds into new loans as they mature.
In light of this, Fitch "would likely downgrade the Greek sovereign Issuer Default Rating to 'C' at this time, reflecting an imminent default event," the ratings agency said.
The move would be classed as 'restricted default' -- better than the 'D' rating associated with a true default. Fitch said the German plan, involving delaying repayment of Greek debt, would be regarded as a default.