GiveMeLeverage
& I will remove the world
Fitch:
Fitch’s sovereign ratings reflect the risk of default to private rather than official sector creditors, so missing the IMF payment would not constitute a sovereign ratings default, but it would be credit negative. Arrears to the IMF by a high-income economy are unprecedented and would indicate extreme liquidity stress.
Implications for Greece’s sovereign rating would depend on the country’s ability and willingness to cure the missed IMF payment, and the institutions’ response. For example, if an outline deal were agreed or appeared imminent, it is possible that the European Central Bank would maintain Emergency Liquidity Assistance (ELA) to Greece’s banks. Without ELA, Fitch believes capital controls would likely be imposed.
Even assuming a deal is struck, it is unlikely that Greece would regain market access by the end of an extended second programme. The struggle to agree tax and pension reforms, the heated rhetoric that has at times accompanied this week’s discussions, and popular opposition to austerity in Greece, suggest that negotiating a third programme (or equivalent) will be challenging, with recurrent risks of a loss of trust between Greece and its official creditors.
Prolonged uncertainty has done lasting damage to the Greek economy. The hit to investor, consumer, and depositor confidence could push the economy from stagnation to contraction (we forecast no growth this year).”
Fitch’s sovereign ratings reflect the risk of default to private rather than official sector creditors, so missing the IMF payment would not constitute a sovereign ratings default, but it would be credit negative. Arrears to the IMF by a high-income economy are unprecedented and would indicate extreme liquidity stress.
Implications for Greece’s sovereign rating would depend on the country’s ability and willingness to cure the missed IMF payment, and the institutions’ response. For example, if an outline deal were agreed or appeared imminent, it is possible that the European Central Bank would maintain Emergency Liquidity Assistance (ELA) to Greece’s banks. Without ELA, Fitch believes capital controls would likely be imposed.
Even assuming a deal is struck, it is unlikely that Greece would regain market access by the end of an extended second programme. The struggle to agree tax and pension reforms, the heated rhetoric that has at times accompanied this week’s discussions, and popular opposition to austerity in Greece, suggest that negotiating a third programme (or equivalent) will be challenging, with recurrent risks of a loss of trust between Greece and its official creditors.
Prolonged uncertainty has done lasting damage to the Greek economy. The hit to investor, consumer, and depositor confidence could push the economy from stagnation to contraction (we forecast no growth this year).”
