Fitch sees risk of Greece, U.S. debt defaults
Fitch Ratings said on Tuesday that it would regard a voluntary rollover of Greece's sovereign bond maturities as a default and would cut the credit rating appropriately, keeping pressure on Athens ahead of a confidence vote in parliament.
The definitive comments weighed on the euro and underscored how much is at stake for Greece, which is struggling to implement a deeply unpopular fiscal austerity plan necessary to win the next tranche of emergency aid from the European Union and International Monetary Fund.
Fractious euro zone finance ministers are trying to patch together a second aid package for Greece, with more official loans and, for the first time, some sort of contribution by private investors who hold Greek government bonds.
Fitch would regard such a debt exchange or voluntary debt rollover as a default event and would lead to the assignment of a default rating to Greece, Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, said at a conference in Singapore.
A month ago Fitch downgraded Greece's credit rating three notches to B+ and warned it could cut the rating further into junk territory. At the time, the rating agency said an extension of the maturity of existing bonds would be considered a default.
Standard & Poor's cut Greece's rating to CCC from B on June 13, and warned that any attempt to restructure the country's debt would be considered a default.
Moody's has a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.
Fitch's Colquhoun also reiterated that the rating agency would place the U.S. sovereign rating on watch negative if Congress did not raise the federal government's borrowing ceiling by August 2, and said if the U.S. government misses an August 15 coupon payment, then Fitch would place the rating on restricted default.
But it added it believed it was very likely that the debt ceiling would be raised and default would be avoided.
Fitch had made similar comments earlier this month and Moody's and S&P have issued warnings along the same lines. But Fitch was the first major ratings agency to say U.S. Treasury securities could be downgraded, even for a short period.
U.S. lawmakers working to rein in rising debt said on Monday they will have to make substantial progress this week to ensure the country retains its top-notch credit rating.
(Reporting by Masayuki Kitano, Writing by Kevin Plumberg; Editing by Kim Coghill)
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