Fitch, the US rating agency, just downgraded Greece from B to CCC, which represents the next dark chapter in the fall of one of Europe’s proudest nations.
Fitch recently lowered its rating for Greece, an EU nation going through economic recession, as Fitch’s perception of the country’s credit worthiness dropped while probability of bankruptcy increased due to the new government in place.
The rating agency lowered Greece’s status from B to CCC, meaning that the risk profile Greek bonds had been appropriate only for speculators (“junk”). The rating reflects Fitch’s view that failure risk is a real possibility given funding, liquidity and solvency pressure in the context of the exceptionally challenging domestic operating environment.
The Greek economy is struggling heavily to grow again, while it’s difficult for the country to borrow money from the international markets since 2010. Greece has since relied heavily on funds from other Euro-zone countries and the IMF.
According to Fitch, the following factors have placed extreme pressure on Greek government funding:
Lack of access to Capital Market of Greece
Uncertain outlook on timely payment by state institutions
Tight liquidity situation of the domestic banking sector
However, lenders hoping to help salvage Greece from the present economic state will commence the review of reform measures put in place by Prime Minister Alexis Tsipras.
The government has made a promise to do something about the present austerity measures which had kept the nation under recession for six years but have until Monday to produce an acceptable list of reforms aiming to restore the economy or else it would not get anymore funding.