Table: European Sovereign Credit Ratings
SINGAPORE—Moody's Investors Service Monday slashed the Greek government's debt ratings three notches deeper into junk territory, warning that the nation's newest bailout deal implies a temporary sovereign default and sets a bad precedent in the 17-country euro zone.
European Union leaders last week agreed to another €109 billion ($156.5 billion) in official financing for Greece, combined with €37 billion from the private sector to roll over maturing debt.
Moody's said Monday the program indicated that the likelihood of a distressed debt exchange and a default on Greek government bonds was virtually 100%. The ratings agency raised the likelihood that private creditors will suffer "substantial" losses on their holdings of Greek government debt.
The credit-rating firm cut Greece's foreign- and local-currency bond ratings to Ca from Caa1, assigning them a developing outlook due to uncertainty over the exact market value of the securities that creditors will receive in a debt exchange.
"After an exchange, we'll do a fundamental analysis of (Greece's) securities ... and consider the risk of a re-default," said Sarah Carlson, vice president-senior analyst, Sovereign Risk Group at Moody's. "It's our experience, if you look back at history, that sovereigns that default will often default again."
Unlike the other two major credit rating agencies, Moody's doesn't have a single-D rating. The latest move to Ca leaves Greece one notch from Moody's lowest rating, single-C.
"Looking further ahead, the EU program and proposed debt exchanges will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden," Moody's said.
It added that Greece's support package would also benefit other members of the euro zone by curbing the severe risk of near-term contagion that would probably have resulted from a disorderly payment default or large haircut on outstanding Greek debt.
"However, Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100% of (gross domestic product) for many years and it will still face very significant implementation risks to fiscal and economic reform," Moody's said.
The Greek support package benefits all euro-zone sovereigns by containing contagion risk that would have followed a disorderly default, Moody's said. Other positive effects include a short-term boost to market confidence, new tools to help stabilize sovereign-debt prices and a lower interest rate on European Financial Stability Fund funding.
But for euro-zone sovereigns that aren't rated Aaa, "the negatives will outweigh the positives and weigh on ratings in the future," Moody's wrote.
The Greek package sets a negative precedent for future restructurings that will weigh on the credit ratings of other sovereigns with fiscal problems, Moody's said in its report.
The Greek package is good news in at least one sense for Ireland and Portugal, which will pay lower interest rates going forward, Moody's said. The agency cautioned that this positive effect is offset by the precedent for future debt deals for weaker euro-zone members.
As for triple-A-rated European countries, last week's announcements should not affect their ratings. "Countries are rated Aaa for a reason," said Alastair Wilson, managing director EMEA Credit Policy at Moody's. "They are assumed to have the tremendous strength and depth necessary to deal with any shocks."
Fitch Ratings Inc. on Friday became the first major ratings company to say that a new aid package for Greece will put the country in "restricted default" and ratings of other peripheral euro-zone countries will also be affected.
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2011-07-26 11:20 编辑：essaywriter