Fitch Cuts Greece To Triple Hooks From B+, Off Rating Watch Negative, Blast Lack Of Any Clarity

Tyler Durden's picture

Fitch Ratings-London-13 July 2011: Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'B+. The Short-term foreign currency IDR is also downgraded to 'C' from 'B' and the Rating Watch Negative (RWN) on all three ratings has been removed. The agency has affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states, including Greece.
The downgrade follows the assigning of a RWN on Greece's ratings on 20 May. At that time, Fitch stated that it would resolve the RWN in light of the conclusion of the fourth review of Greece's economic programme by the IMF and that in the absence of a fully-funded and credible EU-IMF programme, Greece's sovereign ratings would likely be lowered to 'CCC'. Moreover, Fitch's previous rating of 'B+' was premised on the judgement that provision of new money would not be conditional on private sector participation in any new and enhanced EU-IMF programme that would potentially result in a default event.
Today's rating downgrade reflects 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 macroeconomic outlook.
New money is required to address Greece's fiscal funding shortfall that would otherwise emerge in 2012 - a key weakness of the current EU-IMF programme highlighted by Fitch at the turn of the year. Fitch had expected the uncertainty surrounding new money, along with the role of private creditors, to be resolved with the completion of the fourth review of the current EU-IMF programme earlier this month. The agency notes that while the main parameters of a new multi-annual adjustment programme were discussed at an Ecofin meeting on 11-12 July, no further clarity on the volume and the terms of new money or the nature of private sector participation was forthcoming.
Fitch remains of the opinion that any additional financial support for Greece will 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. New European Commission estimates of gross fiscal financing needs of EUR172bn up to mid-2014 imply substantial additional EU-IMF financial support over and above the EUR110bn already committed. However, the agency is concerned that reliance on privatisation receipts of EUR30bn and largely unquantifiable private sector participation to supplement official new money would leave a new programme vulnerable to future funding shortfalls, subjecting Greece to continuing uncertainty. While asset sales of EUR5bn look attainable in 2011, the privatisation programme will become increasingly challenging.
Fitch believes any new programme must be backed by credible policy targets. The successful passage through parliament of the Medium Term Fiscal Strategy at the end of June sent a strong message that the Greek authorities remain fully committed to the EU-IMF programme. However, official new data for the first six months of 2011 point to expenditure overruns and revenue shortfalls, highlighting the urgent need for recently legislated new measures for 2011, while there are growing doubts about the capacity of the Greek economy to withstand further fiscal consolidation in a climate of continuing economic and financial uncertainty. Thus, a further contraction in economic activity of some 4% of GDP now looks likely in 2011, followed by a weak recovery in 2012.
Fitch's 'CCC' rating encapsulates substantial credit risk and acknowledges that default is 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.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
camaro68ss's picture

Bullish, I bet this "Tradition" of down grading Greece is just "Transitory".


Netflix to the moon bitchz

ratso's picture

The implication of this downgrade of Greek debt is that the bag holder banks in Europe are quickly turning into Zombie Banks.  They are viable only to the degree that the ECB and individual countries guarantee that these banks will be kept liquid.  It took Japan 20 years to get rid of their Zombie Bank problem.  China is well on the way to creating its own version.

knukles's picture

Grecian Ratings Drama in One Act


Fitch: We downgraded you to CCC, Greece.

Greece:  What?  Fuck you mean?

Well, there’s no clarity surrounding this whole financial problem

Whaddya mean?  The EU, IMF and somebody else whoever it was had a meeting about it.
We know there was a meeting, we read everything they wrote about it, and there’s no clarity.
Well, you shoulda gone to the meeting.

What?  We’re not invited to the meeting.
We’ll tell you about it.
No, you’re a conflicted party; we have to hear it from somebody else.
Whaddya mean conflicted?

The meeting’s about you, you dolt.
No, it’s about them.
Whadda mean about them?
We’re the ones owes them money and we can’t pay, so why worry about us?  Everybody knows. (Leonard Cohen singing “Everybody Knows” in background)
Guess you got a point there.
So maybe you should be more worried about their ratings, eh?

Now that’s a thought.

So there ya’ go, leave us alone and go play with their ratings. Would you like to play with my rating?
Put that thing away.  That’s disgusting!  You perv.

Here, bend over.
Are you crazy?
No.  You know the old saying; “When in Greece, take it as the Greeks do.”
Lemme go.
Lemme outta here. Lemm… mufbbl ghh upphhhhhhhh
Zorba, get the olive oil, we got a new one! 

(Closing scene… serene field, flowers, butterflies, unicorns shitting rainbow colored Skittles, morphing into face of young man originally from Fitch, now behind desk with plaque stating “Director, Greek National Ministry of Ratings, with silly ass grin on face)




The Axe's picture

who the fuck cares...just buy nflx or amzn    cash your profits in to buy gold....then buy a greek island on sale....

vote_libertarian_party's picture

CCC...that means ching ching ching MONEY BABY!!!!



Dick Darlington's picture

When Italy drops to BB it's gonna be "bunga bunga" all night long!

misterc's picture

I drop my pencil.

Rating agency comes around the corner, says "You dropped your pencil."

Globalist Slayer's picture

LOL.  Indeed.  The fact that you dropped your pencil highlights the need for new measures to be implemented to address the possibility of the event from reoccurring.  No further clarity was forthcoming regarding the steps that you are prepared to take to prevent such an occurrence from taking place.  Any third party involvement in bringing this event to your attention reflects the vulnerability of the pencil to further impairment.  Thank you, "Captain Obvious", Fitch, for your useless insight.  Oh, by the way, here's to a job well done with the mortgage backed securities fiasco.

karzai_luver's picture

someone dropped a pencil?????



Max Hunter's picture

Where were they 5 years ago when you were jabbing a pencil in my eye???  :)

boiltherich's picture

You mean they still do not have control over gravity?

kapillar's picture

I think that you totally underestimate the contagion risks resulting from further pencil dropping. Once the ramifications of the fall of the pencil is fully understood by the financial community and central banks have exhausted their means of providing accomodative measures to pencil droppers, rating agencies across the board may feel obliged to consider any measure as an event of def .. definitive action required by ... Mom? Mom?

swissinv's picture

Well I have to say, Greece is now definitely fucked... the EU will now let them go and all the sales and efforts were for the birds...

GeneMarchbanks's picture

At this point, the goal is simply torture anybody interested in this issue until you simply say: I give up! Then they can promptly default and nobody will care.

Wishful thinking... at best.

Version 7's picture

Not to worry. The EU Justice Comissioner Viviane Reding has already promised to shut down or desmantle, or both, all the US rating agencies. For the sake of democracy.

Dick Darlington's picture

From Fitch's website:

Fitch Ratings and Fitch Solutions, as well as Algorithmics, a leader in enterprise risk management solutions, are part of the Fitch Group. The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France.


How did the song by Alanis Morrissette go? Lalalaa, isn't it ironic. Or something like that. =)

Version 7's picture

They'll be dismantled anyway. For working for the enemy.

boiltherich's picture

People will get their information from somewhere about the creditworthiness of debtors, or they will not invest, onthe one hand you have instead of the ratings firms the financial net like ZH which will tell them all they need to know; fiat is a ponzi scheme and there are no longer any investments that can reward you for the risks you are taking.  On the other hand without independent ratings agencies who in their right mind would would put a dime into these debt markets?  In fact, a lot of invested money is required to be invested only in topp notch rated bonds, with no rating it would be illegal to invest in these sovereigns.  Trust me, you don't need S&P or Fitch, I am Enron, would I lie to you?

karzai_luver's picture

well that's nice , but it's 10 years (at least) too late.


knukles's picture

A couple of days ago some wise seer in the upper reaches of the distinguished geniuses in the EU plutocracy demanded that there be an EU entity established to provide ratings on an independent, non-biased, undistorted, non-conflicted, professional, timely, thoughtful, rational (blah blah yada stfu alrady) manner.


(drum roll, flyover by borrowed American jet)

The Ministry of Ratings

sabra1's picture

and...............tonite china downgrades USA to get even, for the china bought useless bonds!

SDRII's picture

Spanish Finance Minister Elena Salgado said the nation might need to endure even deeper spending cuts next year than those approved by Parliament yesterday as it battles to stave off Europe’s debt crisis

Dick Darlington's picture

So far only thing that has come out of her mouth is hard and cold denial. Doesn't matter whether it's abt the deficit, "growth",  banks or whatever, the only thing she has said is "we have no problems, nada.".

papaswamp's picture

Greece will never be able to repay. European countries are pouring money into a black hole. BDIY down almost 2%. HARPEX has rolled over and never recovered anywhere near precession levels. Being one if not their main industry...shipping is in a decline.

karzai_luver's picture

None of them can "repay" including the nbr 1 deadbeat , usa.

You drop the mil out of the mix and this joke would collapse overnight.

Only the gun props it up now.



qussl3's picture

Almost all suckers onboard.

Once they sell the QE3 is here BS to the sheep, fun and games will follow.

Beware your paper PMs too.

Banana Ben made it pretty clear QE3 only considered if there is the threat of deflation, oil at 98 is not deflationary.

john39's picture

that seems about right.  last big head fake, then the floor drops out.

Saxxon's picture

That's what I think john39; and right soon.  I took advantage of today's 5% plus jump in Ag to finally exit my AGQ which has gone a long way in easing my adjida (Italian: stomach ache) over conditions.  IN cash now, debating ZSL but will probably stay my hand shorting Ag just now).  Good luck.

Cognitive Dissonance's picture

Gpap - "Damn those scurrilous rating agencies. Damn then to hell."

GeneMarchbanks's picture


I read your article. I was wondering if have ever read the work of one Ernest Becker? Just curious.

knukles's picture

I lost it.
I forgot.  Who just got downgraded?
Greece, Italy, Ireland, Iceland, Spain, Portugal or all of the African MENA region, Afghanistan, Iran, Iraq, Somolia, Egypt, Yemen, France, the EBC or the IMF?

Cognitive Dissonance's picture

It does get confusing sorting out the losers from the losers.

slewie the pi-rat's picture

was it a ratings agency got downgraded?  not buffett-moody's, i'll betcha!

carbonmutant's picture
Greece needs additional 71 billion euros in new EU aid

WASHINGTON: Greece needs an additional 71 billion euros ($100.6 billion) in European Union aid and 33 billion euros from private creditors to weather its debt crisis, the IMF said Wednesday.

Market sentiment has sharply soured against Greek debt, the IMF noted, pushing back its estimate for the eurozone country's return to the debt markets to the second half of 2014. The prior estimate was for early 2012.

Jonas Parker's picture

So Obama and friends cancel the August Social Security chrecks and send the money to Greece instead! Oopa!

Neezer's picture

In other news, Fitch has just assigned a AAAA sovereign debt rating to US equities after the Bernanke testimony.

coppertop's picture

Greek needs another olympiks

qussl3's picture

SNB and BOJ about to have fits soon.

With Banana Ben saying that the USD is less of a safe haven their export industries will just LOVE the handicap.

JSD's picture

Long EUR/USD.  Very Long.

Hansel's picture

Fitch had to wait until Greek debt yields 30% to downgrade.  Timely.

scratch_and_sniff's picture

Exactly, a joke. I think they only do it to sound impartial and objective, "oh, look at the wise sages doing things thoroughly, they might be a bit eccentric but they sure are objective".

citta vritti's picture

whew, at least they’re off that Rating Watch Negative list 

knukles's picture

Pronounce "CCC"

cee cee cee

Sounds like somebody being arse bunged if I've even heard it.
Poetic justice a la Pellican Bay or Greece...
Oh never mind.
Piis on it, I'm gonna to a Lions Club lunch and taunt everybody who told me a year ago that I was a punk for owning gold, silver, munis, commodities and non-US dollars.

knukles's picture

Never mind.  They all passed away.  Old age.

Lord Welligton's picture

Does this not come a day or two after the ECB said they would still accept Greek debt in Repo as "not all" the ratings agencies considered it junk?

Who's next?