Fitch downgrades Greece's rating, says default likely

Posted By: Religare
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Fitch downgrades Greece's rating
Leading global credit rating agency, Fitch ratings downgraded the credit rating of the struggling Greek economy deeper into junk status on Wednesday amid worries over a near-term Greek default.

The rating agency cut the sovereign credit rating of Greece further into junk territory by two notches to C from CCC.

"Default is highly likely in the near term," Fitch ratings said.

Greece on Tuesday struck a crucial debt deal with the European Union for a second bailout package of 130 billion euro.

Under the terms of the deal, the nation's private creditors will undertake a loss of 53.5 per cent on the value of their Greek sovereign bond holdings, which will cut down Greece's debt by around 100 billion euro.

However, Fitch warned that a debt swap with private creditors when completed will constitute a ratings default. Once the debt swap arrangement is completed, Greece will be re-rated at a level consistent with the agency's assessment of its post-default structure and credit profile, Fitch added.

Economy experts are doubtful that the latest bailout aid will be enough to bring down the nation's staggering debt levels.

The threat of a default still remains high as the economy enters its fifth straight year of recession. Moreover, looming elections and social unrest may mean that Greece may fail to deliver on its austerity accord and economic reforms required to cut down debt levels and boost competitiveness.

Dion Global Solutions Ltd

Read more about: euro zone, greece
Story first published: Thursday, February 23, 2012, 23:31 [IST]
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