Fitch on Thursday sliced Greece’s long-term credit rating to CCC from B-, citing a “heightened risk” Greece won’t sustain its membership in the eurozone.
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The country this week failed to forge a new government after elections there fractured its parliament. At stake is Greece's ability to continue receiving bailout funds from the European Union and International Monetary Fund. There are some parties that support the bailouts, and the deep deficit-cutting measures that come with them, but other are strongly opposed to them.
New elections have been called for next month, however, the outcome is highly uncertain. Fitch said in its report that if a new government can't be formed with a mandate to receive the rescue, it is probable that it will leave the eurozone currency bloc. The move, the ratings company said, is likely to send shockwaves across the private sector.
"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," Fitch said.