Fitch downgraded the long-term rating of Greece’s debt from “B-” to “CCC”. The rating agency justified its decision by the “high” risk of the country exiting the euro area. Short-term debt ratings of Greece was changed from “B” to “C”.
Wednesday, European Central Bank temporarily stopped funding operations to some Greek banks to limit its risks. ECB chairman, Mario Draghi, has underlined that it will not compromise the principles of the institution just to keep Greece in the euro area, according to Bloomberg. The ECB has announced that it will pass the responsibility of financing the Greek banks to the central bank of Greece until the Greek financial institutions will strengthen their capital in a proper way. “Once the recapitalization will be completed, and we expect to be completed soon, the banks will regain access to standard refinancing operations of the Eurosystem,” the ECB said in a statement. Draghi admitted for the first time that Greece could leave the euro area.
Although the ECB “would clearly prefer” for Greece to remain in the euro area, the central bank will continue to act in such a way as to maintain the integrity of its financial situation, said Draghi in a speech in Frankfurt. “Greece’s exit from the euro area was considered until now an absurdity. Gradually, it becomes a real scenario. ECB put its own financial situation first over the geography of monetary union,” comments Thomas Costerg, economist at Standard Chartered Bank, London.
Discussions on Greece leaving the euro area were re-started after general elections on May 6, which could not give a ruling coalition. Greek state called new elections for June 17, and polls show that although most Greeks will want to remain in the eurozone, the biggest gains will be obtained SYRIZA, an extreme left party, which opposes austerity measures agreed with EU, IMF, and ECB in the 130 billion euros bailout agreement.
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