Moody's: Greek rollover would likely be credit event

Reuters

By Daniel Flynn

PARIS (Reuters) - The managing director of Moody's sovereign risk group said on Tuesday it was hard to see how a private sector rollover of Greek debt would be truly voluntary and such a move would therefore likely constitute a default.

Continue Reading Below

European officials are striving to arrange a private sector rollover as a key part of a new rescue plan for Greece, to help justify to their taxpayers the burden of fresh financial aid to the struggling euro zone member.

Bart Oosterveld warned that Moody's could classify a rollover as a default if the credit rating agency believed that investors had only taken part because they feared the consequences of not participating.

"It's hard to imagine in the current circumstances that people would voluntarily do this," he told reporters in Paris.

"Our default definition contemplates that for something to be voluntary it has to be truly voluntary ... More likely than not this would be a credit event in our view."

Oosterveld, who is based in New York, said there were notable differences with 2009's Vienna Initiative for eastern Europe, when parent banks agreed to keep credit lines open to subsidiaries in Romania, Latvia, Hungary and Serbia.

Moody's assigns a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.

Oosterveld said Moody's saw the risk of a default increasing among troubled euro zone periphery countries, "sometimes from a low base, sometimes from a high base."

However, he noted that the combined debt of these economies made up only 13.5 percent of the region's economy.

"The euro zone governments and the European Central Bank have the resources and the incentives to contain (this), especially short-term financial pressures," he said.

(Reporting by Daniel Flynn; Editing by Catherine Evans)