LONDON (Reuters) - Greece’s credit rating could be cut if talks with its international creditors do not make progress by the time of Fitch’s next review in May, one of the firm’s senior ratings directors said on Thursday.
The new Greek government has signalled it will stand by its anti-austerity pledges, setting it on a collision course with European partners reluctant to renegotiate the aid package Athens needs to help pay its huge debts.
Fitch is the last of the big three ratings agencies, after Standard and Poor’s and Moody’s, to send a warning to Greece’s new anti-bailout coalition.
“If by our next review on the 15th of May there is no progress on these talks or they look to be failing, of course that would be a trigger for a downgrade,” Douglas Renwick, the firm’s head of western European sovereigns, said during a conference call.
“Alternatively, if a deal is reached with more financing and more support, then that may be a cue to affirm the rating.”
Fitch revised the outlook on Greece’s “junk” status B rating to negative from stable earlier this month.
The agency is also closely watching Greece’s banks, which are experiencing deposit withdrawals and have seen their borrowing costs soar amid the political uncertainty.
Greece’s top four listed banks, Alphabank (ACBr.AT), Piraeus Bank (BOPr.AT), National Bank of Greece (NBGr.AT) and Eurobank Ergasias (EURBr.AT), are all rated B-minus by Fitch, one notch below the sovereign debt.
“Fitch will continue to monitor all the developments on the credit profile of the banks over the next days and weeks,” said Josep Colomer, Fitch’s director, financial institutions.
“If any prolonged period of political deadlock and uncertainty puts significant pressure on the operating environment or banks’ financial profiles, there could also be negative implications for the ratings of banks.”
But the agency said the fallout from Greece’s troubles should not affect other euro zone members as it has done in the past, even with fears that a breakdown in negotiations could lead Greece to exit the currency union.
“In 2012, when people were last asking these questions about Greece, the systemic risk of sovereigns was quite a bit higher,” said Renwick.
Additonal reporting by Nigel Stephenson; Editing by Kevin Liffey