Fitch: Greek deal to put country in default

[July 22, 2011]  LONDON (AP) -- Fitch ratings agency said Friday that it will put a default rating on Greece's government bonds as a result of the eurozone's new plan to get banks to share the burden of helping the country.

The eurozone plan says banks will be asked to contribute billions to Greece by rolling over debt, swapping bonds or selling them back at low prices.

As expected, Fitch said that because that would mean a loss for those banks, it will lower Greece's rating to "restricted rating." That rating could be lifted, however, as soon as Greece issues new bonds to the banks.

Those new bonds would be guaranteed by eurozone governments.

The banks' contribution is part of a broad deal to help Greece.

The country will get euro109 billion ($156 billion) in new financing in a complex package that includes new loans, buybacks of Greek debt, and credit guarantees under the deal agreed Thursday by the leaders of the 17 countries that use the euro.

The European plan will help ease Greece's burden by cutting interest rates and extending repayment on bailout loans, and by asking Greek bondholders such as banks and investment and pension funds to accept less than the full value of their investments through bond swaps and rollovers. Those transactions will give them bonds that pay less interest -- around 4.5 percent on average -- over a much longer period of 30 years.

[Associated Press]

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