The credit rating agency, in an announcement said the downgrade reflected the absence of a new, fully-funded and credible EU-IMF programme for Greece, coupled with heightened uncertainty surrounding the role of private creditors in any future funding, as well as Greece’s weakening macro-economic outlook.
Fitch said Greece required additional money and said that any financial support would only be credible in providing a path to fiscal solvency if it is fully funded beyond the end of the current programme in mid-2013. It also believes any new programme must be backed by credible policy targets. The successful passage through parliament of the Medium Term Fiscal Strategy sent a strong message that Greek authorities remained fully committed to the EU-IMF programme, Fitch said. The credit rating firm said its CCC rating encapsulated substantial credit risk and acknowledged that default was a real possibility. As previously stated by Fitch, private sector involvement would likely be viewed as a sign of sovereign credit impairment and could trigger a rating default event.
Finance ministry surprised with Fitch's decision
Greece's Finance ministry on Wednesday said it was surprised by a Fitch Ratings decision to downgrade the country’s rating into junk territory but stressed that the move would not affect the country’s banks.
“It is surprising that Fitch made this announcement, since the eurozone and the IMF plan is already determined and known,” the ministry said in a statement.
“Fitch’s decision is not affecting the Greek banking system,” it said.