The world does not cease to amaze me. Ratings agency Fitch downgraded Greece not due to its huge debts but due to … its voters. Fitch warned that should the June elections produce an anti-bailout government, an exit from the euro is possible, and therefore the agency would consider it as a default event!
Fitch ratings agency downgraded debt-crippled Greece deeper into junk territory on Thursday, warning of a “probable” Greek exit from the euro currency union if new national elections next month produce an anti-bailout government.
Fitch said it had cut Greece’s rating by one notch, from B- to CCC, the lowest possible grade for a country that is not in default.
“The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union,” the agency said in a statement.
The country is now headed for a new vote next month, most likely on June 17, and anti-austerity parties which clocked strong gains on May 6 are again expected to do well. That has raised deep concerns that, if the new government reneges on Greece’s austerity pledges, the European Union and the International Monetary Fund could cut off the flow of bailout loans. Those rescue funds have shielded the country from bankruptcy for two years but had been agreed in exchange for deeply unpopular cutbacks.
“In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF program of fiscal austerity and structural reform, an exit of Greece from (the euro) would be probable,” Fitch said.
“In the event of a Greek exit from EMU, Fitch would treat the forcible re-denomination of sovereign and private sector debt into a new Greek currency as a default event,” it added. (AFP via vcstar)
Next step is that rating agencies issue political manifestos in balance sheets forms and tell citizens of the free and democratic world who will have to vote for…
Why are you surprised, kt? Of course, an election that doesn’t result in a new government, but a politcal deadlock and the delay of important decisions, doesn’t strengthen the confidence in a nation’s ability to create a turnaround. That’s obvious, imho. Remember: United you stand, divided you fall. Despite all the dishonest rhetoric by the parties, there’s really only two options for the future:
A) Staying within the Euro, and trying to create the best conditions for an economic revival within that framework
B) Reverting to the Drachme, and using the ability to print fresh money to fund a stimulus for jumpstarting businesses and industries.
Neither of those two alternatives are easy, neither come without hardships, but the people have to decide which side they’re on. And they shouldn’t fall for spinmasters who promise them an Euro without austerity. The money may be “there” (mostly in other European nations, it seems), but it’s out of reach for any Greek government. Both Papandreou and Papademos tried to get a grip on it, but failed. There’s no reason to believe a Tsipras government would fare much, if any, better.
So, Greek voters will have to unite behind one of the more reasonable parties, which don’t promise the moon and the stars. Only a clear vote for one side will produce a government that is able to do the hard work of getting the nation on a course towards a better future.
Gray, I don’t believe things are simple and just Black or White dilemma. What’s the purpose of a MoU that misses it targets because 1) Greek politicans do no apply the minimum except raising heavy taxes and horizontal pensions/wages cuts 2) it is so strict that does not leave people the chance even to take a breath. And ‘growth measures’ are a ‘favor’ (mor eor less Schaeuble).
I usually share your view about life not being simply “either/or”, kt. But in this case, there’s really only two realistic options. And, indeed, it increasingly looks like Greece can’t reform fast enough to balance it’s budget (exluding debt payments, which are already paid by the Troika now) in the foreseeable future. So, to return to the bad old Drachme is probably the less painful choice. But that’s it, two options. The government has to fund the state’s expenses somehow, and this can only be done with financial help by other Eurozone members or with freshly printed money. There isn’t any third way, there aren’t any big spenders in these harsh times of the 21st century who are willing to subsidize other nations without demanding anything in return.