Tue Dec 30, 2014 5:21am EST
(The following statement was released by the rating agency) LONDON, December 30 (Fitch) Early elections following the Greek parliament's failure to appoint a new president increase the risks to Greece's creditworthiness, Fitch Ratings says. Negotiations with official creditors, and any potential reopening of market access, will be put on hold until after the elections. Following the elections, which are likely to take place on 25 January, political and policy uncertainty will probably remain high for some months. If the left-wing opposition Syriza party wins the largest share of the vote, it will receive a 50-seat bonus and will therefore be part of any government that is formed. Syriza has maintained a lead in the opinion polls over the incumbent centre-right New Democracy party since coming top in May's European elections. However, this lead has narrowed in recent weeks making the election a close call and an overall Syriza majority unlikely. If the formation of a new coalition is not possible, Greece ('B'/Stable) will return to the polls, which would further prolong the political uncertainty. There are two main channels through which political risk could put pressure on Greece's credit profile. Firstly, prolonged deadlock with the Troika combined with a lack of market access would strain the government's cash-flow by the summer, even assuming the budget was kept under tight control. Secondly, depending on the reaction of bank depositors to developments, the wider Greek economy could come under pressure from renewed capital outflows. Both of those factors would also put pressure on the new Greek government and its foreign creditors to reach an agreement. There is scope for compromise between the Troika and a new Greek government. This holds true for a Syriza-led government, although the negotiations would be much more fraught. Syriza's leader, Alexis Tsipras, has moderated his party's stance since 2012 and has committed to maintaining a budgetary primary surplus and to honouring Greece's obligations to IMF and private creditors. However, the privatisation programme would most likely stall completely under a Syriza-led government and there would be upward pressure on the public sector wage bill. The property tax may also be targeted for removal and overall fiscal risk would increase. Contact: Douglas Renwick Senior Director Sovereigns +44 20 3530 1045 Fitch Ratings Limited 30 North Colonnade London E14 5GN Paul Rawkins Senior Director Sovereigns +44 20 3530 1046 Simon Kennedy Director Fitch Wire +44 20 3530 1387 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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