The capital markets are already suspicious that Greece will not be able to close a bond support deal with other eurozone countries and the IMF. Ratings agency Fitch told Greece that it needed a transaction with its neighbors to create an air of credibility around the nation’s sovereign debt.
S&P became much more aggressive than Fitch as it told Greece that its status with the credit agency could change. According to Reuters, “Greece is at risk of a rating downgrade if high borrowing costs persist and the government does not manage to address the consequent deviation from its deficit-cutting programme.”
Greece is now may move into technical default on some of its notes with the next few weeks, if the expected aid is not forthcoming. The nation could choose to leave the eurozone alliance in the hope that it can devalue its currency. Or, the large, rich nations like German may elect to pressure Greece out of the group so that it is not forced to put German assets into a risk ridden situation.
Either way, Greece is in a death spiral.
Douglas A. McIntyre
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