This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.bbc.co.uk/go/rss/int/news/-/news/business-13853963

The article has changed 4 times. There is an RSS feed of changes available.

Version 1 Version 2
Greece: Voluntary bank help would be a default Greece: Voluntary bank help would be a default
(about 7 hours later)
The Fitch credit ratings agency has said that if commercial lenders roll over their loans to Greece, it will deem the country to be in "default". The Fitch credit ratings agency has said that if commercial lenders roll over their loans to Greece, it will deem the country to be "in default".
As Greece awaits further bail-out money from the EU and International Monetary Fund, private investors are under pressure to extend their loans.As Greece awaits further bail-out money from the EU and International Monetary Fund, private investors are under pressure to extend their loans.
Last week, France and Germany reached a compromise over whether such investors should assume a greater burden, saying any such move should be "voluntary".Last week, France and Germany reached a compromise over whether such investors should assume a greater burden, saying any such move should be "voluntary".
But few think their help is by choice.But few think their help is by choice.
Fitch's comments come as the Greek government is due to face a vote of confidence, a crucial first step towards gaining another 12bn-euro ($17bn; £10bn) loan from the EU and the IMF. Fitch's comments came as the Greek government was due to face a vote of confidence: a crucial step towards gaining another 12bn euro ($17bn; £10bn) loan from the EU and the IMF.
If the government survives the vote, Greece's parliament will be asked to back the latest spending cuts - worth 28bn euros - on 28 June. If the government survives the vote, Greece's parliament will be asked to back the latest spending cuts, which are worth 28bn euros, on 28 June.
Spending cut-backs have already hit benefits, public sector salaries and pensions, sparking protests across the country.
That will not be enough to keep the country going, and another giant support package is being pondered, possibly worth an even greater sum than the original 112bn euros.
'Junk' fears'Junk' fears
Fitch Ratings believes that any softening of terms by commercial banks would come only as a result of political pressure and therefore cannot be deemed "voluntary". This time, commercial lenders such as banks, insurance companies and pension funds are being asked to contribute by voluntarily rolling over their existing loans.
Categorising a borrower as "in default" will mean a further lowering of Greece's credit rating. "Voluntary" help by commercial lenders would mean a loan is paid back on time, but the same amount is immediately lent out again on the same terms.
This is already deemed to be "junk", meaning that lenders are not expected to get back anything like the value of their original loan. In the case of Greece, this effectively means lending on easier terms because, given the current state of the Greek economy, lenders would not be expected to offer the same terms as they did a few years ago.
A further downgrade to default would mean a fire-sale of Greek loans, as certain investors would no longer be allowed to hold such risky assets. Fitch Ratings believes that any softening by commercial lenders would come only as a result of political pressure and therefore cannot be deemed voluntary.
Greece is trying to pass austerity measures through parliament in order to qualify for another slice of aid, worth 12bn euros ($17bn, £12bn) from the EU and IMF. The measures, which have cut benefits, public sector salaries and pensions, have sparked protests across the country. BBC business editor Robert Peston said: "It is simply taken as fact everywhere but the conclave of eurozone finance ministers that Greece has borrowed perhaps twice what it can afford.
In any case, that new money will still not be enough to keep Greece afloat long-term, and the institutions are planning to provide another bail-out, which could be worth more than another 100bn euros. "There is therefore no banker, or pension fund manager or insurance executive anywhere in the world who, left to his or her own devices, would willingly lend more money to Greece."
But amid political pressure from certain quarters, particularly the German government, this requires the willing contribution of private lenders. That suggests any lending will only happen under duress and therefore come under Fitch's default category.
Any contribution may prove worthless if it is viewed as a technical default. Categorising Greece as "in default", or unable to repay its debts, could trigger another financial meltdown and credit squeeze, as lenders, including banks, pension funds, and insurance companies, accept they will never get back the amount they lent.
Greek debt is already deemed to be "junk", but a further downgrade to default would also mean a fire-sale of Greek loans, as certain investors would no longer be allowed to hold such risky assets.
Neil MacKinnon, head of global strategy at VTB Capital, said it was becoming inevitable that Greece would fail to pay its debts. "Throwing more money at the problem might buy time but it doesn't solve the underlying problems and obviously those problems are very serious, and the prospect of debt default for Greece is now looking a very high probability."
Another agency, Standard & Poor's, has also warned that any attempt to restructure the country's debt would be considered a default.Another agency, Standard & Poor's, has also warned that any attempt to restructure the country's debt would be considered a default.
The third leading agency, Moody's has a rating on Greece's debt that implies a 50% chance of a reneging on repayment within three to five years. The third leading agency, Moody's, has a rating on Greece's debt that implies a 50% chance of a reneging on repayment within three to five years.