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And A Little Fuel To The Fire: Greece Downgraded By Fitch

Tyler Durden's picture




 

FITCH DOWNGRADES GREECE TO 'B+'; RATING WATCH NEGATIVE
 
Fitch Ratings-London-20 May 2011: Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'B+' from 'BB+ and the Short-term IDR remains at 'B'. All three ratings have been placed on Rating Watch Negative (RWN). The agency has simultaneously affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states, including Greece.
 
The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform programme necessary to secure solvency of the state and the foundations for sustained economic recovery. Implementation and political risk have risen as further fiscal austerity measures are required to realise the 2011 budget deficit goal of 7.5% of GDP due to the under-performance of tax receipts and higher deficit outturn for 2010 than originally targeted. Moreover, the greater emphasis on privatisation has heightened the risk that the policy conditional funding under the EU-IMF programme will be delayed given the political and technical obstacles to the realisation of EUR50bn of asset sales. Nonetheless, Fitch does expect some assets sales by year-end, albeit relatively modest, and continues to believe that the Greek government remains committed to the programme and to honouring its sovereign debt obligations.
 
The 'B+' rating incorporates Fitch's expectation that substantial new money will be provided to Greece by the EU and IMF and that Greek sovereign bonds will not be subject to a 'soft restructuring' or 're-profiling' that would trigger a 'credit event' and default rating from Fitch.
 
An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly. If contrary to Fitch's expectations, private sector 'burden sharing' as a condition for new money extends beyond exhortation and is coercive, the credibility of policy commitments regarding the European Stability Mechanism and EU-IMF programmes for Ireland ('BBB+'/Negative) and Portugal ('BBB-'/RWN), as well as Greece, would be severely diminished and in Fitch's opinion would adversely impact financial stability across the euro area.
 
New money is required in order to address the fiscal funding shortfall that would otherwise emerge in 2012, a key weaknesses of the current EU-IMF programme highlighted by Fitch following its previous rating action on Greece at the turn of the year. Fitch expects the uncertainty regarding the volume and terms of new money, as well as the role of private creditors, to be resolved with the completion of the current fourth review of Greece's EU-IMF programme expected in the latter half of June.
 
The RWN will be resolved in light of the conclusion of the current review of the EU-IMF programme. In Fitch's opinion, additional financial support for Greece would only be credible in providing a path to solvency if it is fully funded beyond the end of the current programme of mid-2013, implying substantial additional EU-IMF financial support over and above the EUR110bn already committed. Fitch will also incorporate into its review of Greece's sovereign ratings under the RWN the terms upon which new money is provided and the credibility of the associated policy conditionality.
 
The current 'B+' rating would likely be affirmed if an extended and fully-funded EU-IMF programme is articulated, backed by credible policy targets and, as Fitch expects, private sector participation will not be 'involuntary' or require a change in the terms and conditions of existing Greek sovereign bonds.. In the absence of a fully funded and credible EU-IMF programme, the rating would likely fall into the 'CCC' category indicating that a Greek sovereign debt default was highly likely.

 

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Fri, 05/20/2011 - 10:34 | 1295314 boricuadigm-shift
boricuadigm-shift's picture

BTFD!  Why can't they wait until next week?  Poor Greece/EUR getting hammered!

Fri, 05/20/2011 - 11:16 | 1295505 camaro68ss
camaro68ss's picture

O wow, dident see that one come. who whould have known this was going to happen

Fri, 05/20/2011 - 11:45 | 1295612 akak
akak's picture

"I'm shocked, shocked to find Greek bonds and CDOs in this establishment."

Fri, 05/20/2011 - 18:37 | 1296919 smlbizman
smlbizman's picture

linda schivo wants them to pull the fuckin plug already....

Fri, 05/20/2011 - 12:25 | 1295805 trav7777
trav7777's picture

Greece's bonds should be "F" rated.  There is 0% chance they will be repaid full value.  WTF is this ongoing charade that we call bond ratings?

Fri, 05/20/2011 - 10:37 | 1295317 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

The Bernank has sent out the order: "Bring down Europe, we need $dollar strength and an excuse for more QE".

Fri, 05/20/2011 - 10:42 | 1295327 LRC Fan
LRC Fan's picture

I'll believe it when I see it.  Someone is fighting hard to keep the Dow down less than 100.  And they are winning so far.  And probably will win and push it green before day's end.  Just like that bullshit "negative watch" from S&P where the Dow went -240 before ending the week up like 600 pts.  Fuck that. 

And the DXY has met fierce selling any time it makes a new intraday high.  It keeps going up .10, then gets whacked down .07 in a nanosecond. 

Fri, 05/20/2011 - 10:41 | 1295328 HamyWanger
HamyWanger's picture

Greece will never default. I can bet whatever you want on that. Greece is fine. 

If Greece defaults, there's a systemic domino effect. 

Fri, 05/20/2011 - 10:40 | 1295338 boricuadigm-shift
boricuadigm-shift's picture

Bingo!  No one is above the market indefinitely!  Less probable, but still possible!

 

Fri, 05/20/2011 - 10:41 | 1295341 Id fight Gandhi
Id fight Gandhi's picture

Norway stepping away. IMF in disarray, Spain is protesting. It's time to close down the ponzi scheme. They never last. Sooner is better than later.

Fri, 05/20/2011 - 12:45 | 1295884 redpill
redpill's picture

That's why Europe is lucky it is facing the music now.  When the US finally pops it will be ugly.

 

Fri, 05/20/2011 - 10:41 | 1295348 topcallingtroll
topcallingtroll's picture

a coerced "voluntary" restructuring is still a default.  Real traders and financiers don't get fooled by bullshit.

Fri, 05/20/2011 - 10:52 | 1295392 SheepDog-One
SheepDog-One's picture

What goes up, must come down Hamy...no such thing as a perpetual motion machine.

Fri, 05/20/2011 - 12:20 | 1295782 Ying-Yang
Ying-Yang's picture

Including Hamy's wanger

Sun, 05/22/2011 - 09:02 | 1299844 anvILL
anvILL's picture

Why don't you go write some put options for NGB?
I would certainly be a happy buyer if you could add some liquidity there.

Fri, 05/20/2011 - 10:44 | 1295343 WhOracle
WhOracle's picture

it's been the bernank plan since the beginning , S&P and Moody's are part of the US weaponry to blow europe and divert attention off of them.

Fri, 05/20/2011 - 10:56 | 1295407 centerline
centerline's picture

Not sure about that.  The IMF folks are the same anyhow.  Central banks here and there are really just cousins.  My thought is it is a just a ping-pong thing.  Orchestrated moves back and forth to keep things from overheating too quickly.  A collective action to bring "other" economies to thier knees.  Economic warfare my friend.  WWWIII is already under way - in the digital realm.

Fri, 05/20/2011 - 11:07 | 1295459 WhOracle
WhOracle's picture

When the IMF gets handed over to Lagarde the US will be in control.

As posted in another thread DSK's case is part of the ongoing turmoil, Tim Geithner sees in her a great leader and commented about iher in the Time magazine in 2009 (http://www.time.com/time/specials/packages/article/0,28804,1894410_1893847_1894202,00.html). she's backed by Sarkozy, which is a disciple of the governing authority in the US, inquire a little bit about Nicolas Sarkozy's stepbrother Pierre-Olivier Sarkozy, managing director of Carlyle Group... everything is tied.

Fri, 05/20/2011 - 11:35 | 1295575 centerline
centerline's picture

Thanks for the info.  Haven't read those.  Not surprised though.

Fri, 05/20/2011 - 10:59 | 1295411 SheepDog-One
SheepDog-One's picture

Russia says US goes down first, then Europe.

Fri, 05/20/2011 - 11:04 | 1295428 WhOracle
WhOracle's picture

I agree on Russia but i think the US is battling for Europe to go down before them

Fri, 05/20/2011 - 11:20 | 1295509 overmedicatedun...
overmedicatedundersexed's picture

and we all go down together "good night Saigon" the new currency boogie

..http://www.youtube.com/watch?v=j6gZefW4yEA

Fri, 05/20/2011 - 10:38 | 1295318 LRC Fan
LRC Fan's picture

It's a false alarm, BTFD on the Dow and profit bitchez.

Someone is seriously buying very very aggressively on every downtick on the Dow.  There is heavy selling and then boom, it shoots back up in a flash.  Seems like the market "wants" to crash but someone has called the PPT back into action.  Hmmm, Ben?  Is that you? 

Fri, 05/20/2011 - 10:55 | 1295403 SheepDog-One
SheepDog-One's picture

Well the DOW is down -110...certainly cant have THAT in this free infettered fair market now can we?

Fri, 05/20/2011 - 11:09 | 1295470 LRC Fan
LRC Fan's picture

You spoke way too soon...since your comment we rocketed up about 40 pts in minutes. 

Fri, 05/20/2011 - 11:45 | 1295600 Bay of Pigs
Bay of Pigs's picture

Speaking of rockets, watch the Euro in gold terms as we move along. Near new all time highs right now, and looks ready to breakout. 20-30% higher wouldn't be a stretch for a new upleg.

 

Fri, 05/20/2011 - 10:35 | 1295320 downwiththebanks
downwiththebanks's picture

Dissolve Fitch.

Arrest the board for defrauding the public.

Fri, 05/20/2011 - 10:48 | 1295362 WhOracle
WhOracle's picture

same with moody

Fri, 05/20/2011 - 10:48 | 1295365 Ethics Gradient
Ethics Gradient's picture

What, for not downgrading them sooner?

Fri, 05/20/2011 - 10:42 | 1295350 Id fight Gandhi
Id fight Gandhi's picture

Followed by the rest of the countries on fire as protests spread.

Default. Set the debt to zero and give everyone a clean slate.

Fri, 05/20/2011 - 11:00 | 1295412 SheepDog-One
SheepDog-One's picture

Project Mayhem.

Fri, 05/20/2011 - 10:43 | 1295339 LRC Fan
LRC Fan's picture

Plus don't forget this is opex day. 

Fri, 05/20/2011 - 10:41 | 1295346 silvertrain
silvertrain's picture

..

Fri, 05/20/2011 - 10:55 | 1295389 topcallingtroll
topcallingtroll's picture

.

Fri, 05/20/2011 - 10:56 | 1295408 mynhair
mynhair's picture

Flash crash this pig.  Tired of waiting.

Fri, 05/20/2011 - 11:13 | 1295480 LRC Fan
LRC Fan's picture

Doubtful.  We can't even stay at Dow -100 or more for a half hour.  This baby will close green today, count on it!  Then some "big mergers and acquisitions" (Borders, maybe?) will cause AMZN and the QQQs and then by extension the Dow and S&P to gap up on Monday morning. 

Full disclosure I am short so hoping for a flash crash so I can quickly cover and buy more gold/silver. 

Fri, 05/20/2011 - 11:16 | 1295493 scratch_and_sniff
scratch_and_sniff's picture

That was hardcore timing from fitch(even if its an afterthought), i wonder what got into them.

Fri, 05/20/2011 - 11:23 | 1295522 LRC Fan
LRC Fan's picture

Wow, gold really went vertical there

Fri, 05/20/2011 - 11:30 | 1295540 overmedicatedun...
overmedicatedundersexed's picture

PM's reversed, did somebody actually decide facts matter?

Fri, 05/20/2011 - 14:38 | 1296334 Rynak
Rynak's picture

Well, in tyler's words: Commodities ON.

Fri, 05/20/2011 - 11:41 | 1295604 sabra1
sabra1's picture

Economists, analysts and anecdotal reports from companies that supply local governments suggest there is widespread, unrecorded debt among once-free-spending local governments. Some companies are complaining that fiscally frail administrations are pressuring them to do business off the books and not immediately bill for goods and services, said Fernando Eguidazu, vice president of the Circulo de Empresarios business lobby group in Madrid.

Fri, 05/20/2011 - 12:00 | 1295704 WhOracle
WhOracle's picture

Spain is most likely gonna blow this week end...

 

Fri, 05/20/2011 - 11:42 | 1295609 SoCalBusted
SoCalBusted's picture

But it is a Solid B+

Fri, 05/20/2011 - 12:10 | 1295734 PulauHantu29
PulauHantu29's picture

The PM there said he refuses top let any bank creditors take a haircut....all austerity must be carried on the backs of Greek taxpayers.

mmmmm.....how does that work out?

Fri, 05/20/2011 - 12:25 | 1295811 AldoHux_IV
AldoHux_IV's picture

New money is required in order to address the fiscal funding shortfall that would otherwise emerge in 2012, a key weaknesses of the current EU-IMF programme highlighted by Fitch following its previous rating action on Greece at the turn of the year. Fitch expects the uncertainty regarding the volume and terms of new money, as well as the role of private creditors, to be resolved with the completion of the current fourth review of Greece's EU-IMF programme expected in the latter half of June.

Sounds to me that Fitch thinks the ponzi may have a chance of unraveling-- new money is needed to keep the sham going.

Fri, 05/20/2011 - 12:34 | 1295836 vocational tainee
vocational tainee's picture

Greece economy isn`t worse than the british .

Fri, 05/20/2011 - 15:02 | 1296410 Gimp
Gimp's picture

Another rating agency joke B+?  Should be a solid "F"

Fool me once.....

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