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Fitch keeps Greece's high-risk rating as default looms
[WASHINGTON] Ratings firm Fitch kept Greece's high-risk credit rating unchanged Friday, saying the risk that the eurozone country would default on its debt was a "real possibility."
Fitch Ratings affirmed the "CCC" rating it gave the debt-riddled eurozone country in late March in a two-notch downgrade from "B."
"Lack of market access, uncertain prospects of timely disbursement from official institutions, and tight liquidity conditions in the domestic banking sector are putting extreme pressure on Greek government funding," Fitch said in a statement.
"We expect that the government will survive the current liquidity squeeze without running arrears on privately held bonds, but default is a real possibility."
Since the Fitch rating downgrade in March, negotiations between Greece and its official creditors - the European Union, the European Central Bank and the International Monetary Fund - have stumbled while the financial situation of the new radical Syriza-led government has continued to deteriorate.
"The damage to investor, consumer and depositor confidence has derailed Greece's economic recovery," Fitch said. "The damage will take time to repair even if prospects for a successful program completion improve over the coming days or weeks."
The ratings firm forecast zero growth in the economy this year, with risks "heavily tilted" toward a contraction, as the country runs out of cash and faces debt payments to its creditors.
Still, Fitch said it was likely that Greece will reach a compromise deal with its official creditors, which are demanding certain reforms in exchange for financing.
"As a minimum requirement, we expect that the Eurogroup (eurozone finance ministers) will want the Greek government to demonstrate that it has taken some legislative action on structural reform before funds are disbursed. However, as yet, the reforms themselves have not yet been agreed. Time is therefore running short."