LONDON, Sept 20 Greece will probably default but
will not leave the euro zone, Fitch credit ratings agency said
on Tuesday, as pressure increased on the Greek government to
push through with fiscal reforms.
International lenders told Greece on Monday it must shrink
its public sector to avoid running out of money within weeks.
While widely expected, a Greek default would further
unsettle already nervous financial markets, fuelling fears a
precedent had been set for other struggling euro zone states and
sending yields on other peripheral bonds sharply higher.
However, Fitch did not expect Greece to leave the euro zone,
as some in markets have speculated in recent weeks.
"Concerns over the risk of a break-up of the euro zone are
greatly exaggerated," David Riley, Fitch's head of global
sovereign ratings said in a news release. .
Fitch also said it did not expect any systematically
important financial institution or sovereign to be allowed to
Contagion fears have put the spotlight on Italy and Spain's
finances and yields on their benchmark bonds remain high despite
austerity measures and regular European Central Bank purchases
in the bond market over the past month.
Standard & Poor's, another ratings agency, cut Italy's
credit ratings on Monday, pushing the Italian
yield spread over Germany wider.
Worries the crisis could spread have also put pressure on
larger euro zone economies such as France, whose banks are
heavily exposed to peripheral debt.
(Reporting by Ana Nicolaci da Costa, editing by Nigel