Ratings agencies hammer Greece in EU chaos

Credit ratings agencies hammered Greece on Monday after senior eurozone policymakers acknowledged that Athens will need a second bailout package soon to avert a disorderly overhaul of its debt obligations. Officials said the European Union was also looking to lower interest rates on rescue loans to Ireland within weeks and eyeing easier bailout terms for Greece as the common currency area floundered deeper into crisis.
But ratings agency Standard & Poor's suggested far more radical measures would be required to make Greece's 327 billion euros ($470 billion) debt mountain sustainable, saying Athens may have to reduce the face value of its bonds by up to 70 percent, implying big losses for investors.
S&P downgraded Greece's credit rating further into junk territory to B, just one notch above Pakistan's, hitting Greek bank stocks as investors sought safety in German bonds. The euro slid to its lowest level in three weeks against the dollar. Moody's Investor Service threatened to downgrade Greece by several notches, placing Athens' B1 sovereign rating on review due to increased worries that it might seek to impose losses on private bondholders.
Fitch Ratings said it still rated Greece at BB+ with a negative outlook and would not comment on a report in German newspaper Sueddeutsche Zeitung that it planned to downgrade Greece's rating to B or B- this week. The executive European Commission said it hoped for a decision within weeks on reducing the interest rate charged to Ireland to make Dublin's debt more sustainable.
"The Commission is clearly in favour of a rate cut," a spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn said. "The Commission is against debt restructuring." Irish Prime Minister Enda Kenny told parliament that without a return of strong economic growth, "questions of sustainability will remain" around his country's debt. "There is no doubt that a reduction in the interest rate on the moneys we are borrowing from Europe would be a meaningful and appreciated measure," he said, predicting it could be delivered at a euro zone finance ministers meeting next week.
The new Irish government's bid for lower interest payments has so far been blocked by Germany and France, which want Dublin to drop its veto on harmonising the corporate tax base in Europe in exchange or raise its own low corporate tax rate. Kenny made clear he would not consent to raise corporation tax.
In Germany, a senior lawmaker in Chancellor Angela Merkel's conservative party said a further cut in the rate on emergency loans to Greece, already reduced by one percentage point in March, would be justified if it carried out further reforms. Michael Meister, finance policy spokesman of Merkel's Christian Democrats, told German radio he opposed any idea that Athens should restructure its debt or that it should consider leaving the eurozone. The calls for lower interest rates came after a select group of top euro zone policymakers held not-so-secret talks in Luxembourg on Friday evening on how to stem the crisis.