Tags: Fitch | Default | Euro | Zone

Fitch Warns Default in Euro Zone Is Possible

Tuesday, 09 Mar 2010 08:16 AM

A sovereign default within the euro zone is possible, Fitch Ratings said on Tuesday.

Brian Coulton, managing director and head of Europe, Middle East and Africa sovereigns at Fitch Ratings, said it was possible to have a sovereign default within the euro currency bloc, but that would not necessarily mean the break up of the euro zone.

The defaulting sovereign would not necessarily need to leave the euro zone, and the bloc may provide a safe harbor, he added.

However, Ireland and Greece's credit ratings are appropriate, Fitch Ratings said.

"I think that Ireland is very appropriately rated and Greece also, including negative outlook," said Chris Pryce, Fitch director for ratings in Western Europe.

Fitch has a BBB plus rating on Greece with a negative outlook and a AA negative rating on Ireland with a stable outlook.

Fitch still has a negative outlook on Portugal's double-A ratings and is studying the details of the country's new austerity measures announced a day earlier.

"Frankly we're still looking at the details and need a bit more time examining the plan," Brian Coulton, Fitch's head of Europe, Middle East and Africa sovereigns ratings told Reuters at the sidelines of a Fitch conference in London.

"The broad headline numbers are more or less in line with what we previously expected. But frankly it's too early ... we're still looking at the numbers."

Portugal on Monday unveiled plans to cut its deficit to 2.8 percent of gross domestic product in 2013 from 8.3 percent this year by trimming spending on civil servants and public investment, and raising taxes on high incomes and stock market gains.

The draft plan, yet to be submitted to Brussels, is part of a strategy to convince markets Portugal will tackle rising deficits and debt.

That in turn is vital as investors assess whether the country may be next in line to run into Greek-style fiscal problems.

The United States is vulnerable to interest rate shocks, Fitch said, adding it had concerns about the narrowness of its revenue base.

"We have some concerns about the narrowness of the revenue base in the U.S. and its volatility," said Coulton.

"There is a fiscal problem here which needs to be addressed," he told a Fitch seminar on ratings.

Britain's credit ratings will be a concern if there is no timely move on its fiscal policy objectives, Fitch ratings agency said on Tuesday.

"(Britain's) fiscal policy objective needs to be orientated, we haven't seen that yet," Coulton said during a question and answer session at the Fitch conference in London.

© 2015 Thomson/Reuters. All rights reserved.

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