“If by our next review on the 15th of May there is no progress on these talks or they look to be failing, of course that would be a trigger for a downgrade,” Douglas Renwick, the firm’s head of western European sovereigns, said during a conference call.
“Alternatively, if a deal is reached with more financing and more support, then that may be a cue to affirm the rating.” Fitch revised the outlook on Greece’s “junk” status B rating to negative from stable earlier this month.
The agency is also closely watching Greece’s banks, which are experiencing deposit withdrawals and have seen their borrowing costs soar amid the political uncertainty.
Greece’s top four listed banks, Alpha Bank, Piraeus Bank, National Bank of Greece and Eurobank, are all rated B-minus by Fitch, one notch below the sovereign debt.
“Fitch will continue to monitor all the developments on the credit profile of the banks over the next days and weeks,” said Josep Colomer, Fitch’s director, financial institutions.
“If any prolonged period of political deadlock and uncertainty puts significant pressure on the operating environment or banks’ financial profiles, there could also be negative implications for the ratings of banks.”
But the agency said the fallout from Greece’s troubles should not affect other euro zone members as it has done in the past, even with fears that a breakdown in negotiations could lead Greece to exit the currency union.
“In 2012, when people were last asking these questions about Greece, the systemic risk of sovereigns was quite a bit higher,” said Renwick.