Fitch: Bailout is likely to fail
GREECE has received a fresh blow as ratings agency Fitch downgraded the government, warning a “default is highly likely in the near term.”
Even the shaky €130bn (£109.9bn) bailout deal, agreed by Eurozone leaders in the early hours of Tuesday morning, may not be implemented as parliamentarians in Germany’s ruling parties threatened to vote against it.
Fitch argued the debt swap, in which private investors will exchange bond holdings for longer-dated, lower value bonds, might help Greece avoid defaulting next month but counts as a “distressed debt exchange,” meriting a downgrade from triple-C to single-C.
Meanwhile Merkel was forced to rely on the support of opposition parties after several members of her own CDU and coalition partners the FDP rejected the bailout.
“I will vote ‘no’ whatever happens because this is purely about delaying an insolvency,” said the CDU’s Klaus-Peter Willsch.
However, the Greek government did take one step towards fulfilling its obligations, agreeing to work with other countries to clamp down on tax evasion, which has been rampant in the country for many years.
Signing up to the convention on mutual administrative assistance in tax matters will help Greece “restore the longer-term sustainability of its public finances”, and “improve its internal tax collection system and pursue revenues lost to tax avoidance and evasion,” said OECD boss Angel Gurria.
Meanwhile data published by Markit showed economic activity fell in the Eurozone in February, heightening expectations that the first quarter will see a renewed recession, though French and German output expanded.
The purchasing managers’ index for the region as a whole came in at 49.7 – down from 50.4 in January and below the “no change” mark of 50.
Some optimism came from Eurostat data, also published yesterday, which registered a 1.9 per cent monthly rise in industrial orders in December.
“The data are consistent with a mild recession, focused on the industrial sector,” said Barclays Capital’s Julian Callow, “but the new orders figures suggest the Eurozone is very gradually easing out of recession.”