May 17, 2012 / 6:15 PM / 7 years ago

UPDATE 1-FITCH cuts Greece rating on risk of euro zone exit

NEW YORK, May 17 (Reuters) - Fitch Ratings Agency downgraded Greece’s credit rating to CCC from B-minus on Thursday, citing the heightened risk that the country might have to leave the euro zone.

The failure by Greek politicians to form a government underscores a lack of public and political support for an austerity program, Fitch said in a statement explaining the cut to Greece’s long-term foreign and local currency issuer default ratings.

Should elections fail to result in a mandate for a new government to continue austerity measures, a Greek exit from the monetary union would be “probable,” Fitch said.

“A Greek exit would likely result in widespread default on private sector as well as sovereign euro-denominated obligations, despite a moderate sovereign debt service burden following the restructuring of Greek government bonds in March,” the statement said.

Increasingly worried about Greece’s future in the euro zone, foreign lenders and mainstream parties have stepped up warnings that the country risks being cut off from aid if it fails to stick to spending cuts included in its latest bailout package.

Fitch had previously lifted Greece out of default in March, assigning the country a speculative B- rating. Fitch was the first major rating agency to lift the country out of default territory after a debt swap cut Athens’ debt mountain by about 100 billion euros, or close to a third.

It was the first time Greece’s rating had been upgraded since the debt crisis erupted at the end of 2009 and the first Fitch upgrade since 2003.

However, the rating agency noted at the time that there was still a significant and material default risk.

Moody’s Investors Service rates Greece a C, and Standard & Poor’s rates the country CCC.

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