Once again Greece is at front and centre stage in the ongoing eurozone debt crisis as Fitch warned all countries in the single currency that their status is based on what happens with Greece in the coming month/s. If Greece should exit the Euro, there is a high probability that all countries in the European Monetary Union would suffer downgrades as well.
Recently, Fitch downgraded Greece from B- to CCC and then went on to put the rest of the region on alert. If after the election scheduled for June 17 the anti-austerity faction gains prominence, these downgrades are more than likely to take place. Perhaps it will not happen immediately, but there is a great potential for wider downgrades in the very near future.
It is in the hands of the voters, it would appear, because if they vote strongly in favour of anti-austerity, this signals their exit from the single currency. Not only is austerity an issue but structural reform is at stake and if the voters reject these measures, the will show their lack of political and public support of the €173 billion EU/IMF bailout programme.
This is placing mounting pressure on the entire region to contemplate ‘contingency plans’ which already are being considered. The frontrunner for the next Greek election, Alexis Tsipras, calls the austerity measures being asked for ‘barbaric’ and has vowed that he will not yield to the EU’s demands to place his country under such extreme hardships.
At the moment Greece is being ‘ruled’ by a caretaker government and the IMF has suspended work on the international bailout pending the results of the upcoming elections. Whether or not Greece receives the bailout is riding on this election and given the fact that the leader of the rivaling factions is anti-austerity, the odds are in favour of Greece indeed exiting the single currency and defaulting on current bailout loans.
