18.06.2012
By Simon Miller
Fitch Ratings has said that all eurozone countries have avoided being put on ratings watch negative but they are not out of the woods yet.
In a ratings note, Greece and Europe: Back from the Brink, Crisis Unresolved, Fitch said the narrow victory of New Democracy meant that the near-term risk of a Greek disorderly debt default and euro-exit had fallen.
As a result the ratings agency would not be putting all eurozone sovereigns on ratings watch negative as it had threatened if a Greek exit was a probable near-term event.
However, it warned that the crisis in Greece and the eurozone remained intense.
"Fiscal austerity and painful structural reform combined with a strong parliamentary opposition led by Sryzia means that the new Greek government is likely to be fragile," it wrote.
Fitch added that the pace of economic contraction was almost certainly accelerating with Greece's liquidity position fast deteriorating, "underscoring the urgency of forming a new government and the resumption of disbursements under the EU-IMF programme".
Fitch continued: "While the risks from Greece have fallen for now, the severity of the systemic crisis engulfing the eurozone is unlikely to diminish until European leaders articulate a credible roadmap that would complete monetary union with much greater fiscal and financial integration."
"Downward pressure on the sovereign credit profile and ratings of eurozone sovereign governments will intensify so long as a credible path to closer union and a more coherent and united policy response are absent. This includes further boosting the financial backstops against contagion," the ratings agency added.
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