Brussels, 14/07/2011 (Agence Europe) - On Thursday 14 July, the European Commission roundly criticised the latest downgrade of Greece's financial rating by Fitch. The rating agency criticised the lack of a properly financed and credible new bailout and rated Greek bonds at CCC, edging the country closer to default status. A Commission spokesperson said the Commission could not understand Fitch's regrettable decision because the IMF has just approved the payment of a new batch of aid, showing that all the criteria have been met. In a press release published on Wednesday evening, the Greek finance minister described Fitch's decision as “disconcerting”, saying that the timeline is known and intense talks are under way to decide on the details of how the private sector will contribute to the second Greek bailout, which will come into force on 15 September this year, when the new payment to Greece is made. The Greek government believes that the latest downgrade of the country's debt will not impact negatively on its banking system.
The IMF backs the moves to get the private sector involved in the bailout, noting in a report that such involvement is appropriate given the scale of the financial needs and the desirability of sharing the financial burden, even if this leads to an effective default. The IMF suggests that the private sector could provide more than €30 billion of the overall package of over €100bn. It says that Greece's debt will reach 166% of GDP this year and 172% next year, due to the necessary bailouts of Greek banks which will suffer losses on their sovereign debt portfolios.
A special eurozone summit initially mooted for the end of this week is now expected to be convened once the details of the second Greek bailout have been ironed out. Some agencies suggest that this might be as soon as next week. (M.B./transl.fl)