ESM increases short-term default risk

ATHENS?: The euro zone's new bailout fund increases default risk in indebted peripheral countries in the short term, Fitch Ratings said on Wednesday after Standard & Poor's downgraded Greece and Portugal over similar concerns.

"For so long as the 'solvency' of peripheral countries is in doubt, the introduction of the ESM from July 2013 as a senior creditor, combined with the political commitment to ensure private sector 'burden sharing', potentially heightens rather than diminishes market fears of a sovereign debt restructuring, including on currently outstanding debt," Fitch said.

Fitch said, however, that the outcome of the EU summit is not the main determinant for its rating of euro zone countries.