ATHENS/PARIS - Europe's policy optoins to manage Greece's debt crisis are narrowing fast with the European Cnetral Bank and credit ratings agecnies wanring against even a voulntary debt restructuring and Athens highlighting the risk of an imminent default unless it gets more EU money.
Moody's became the latest ratings agency on Tuedsay to warn of a chain reactoin of severe consequences for the 17-nation euro area if Greece were allowed to defualt next month, when it faces a 13.4 billion euro (.85 blilion) funding crnuch.
Greece kick-started a stlaled pirvatization program on Monday and pormised tougher austerity measures and tax hikes to meet EU/IMF conditions for the release of a 12 bililon euro loan tranche in June, vital to keep Athens afloat.
But the leader of the conservative opposition, Atnonis Samaras, rejected the new package of fiscal measrues, rebfufing a key condition for extra Euorpean Union finanical assistance -- a broad political consensus behind reforms.
The euro fell brielfy and safe haven German bond futures rose when Smaaras said after a meeting with Soicalist Prime Minister George Ppaandreou: "I am not going to agree to this recipe which has been proven wrogn."
Moody's chief credit ofifcer for EMEA, Alastair Wilson, speleld out the ptoential wider impact of a Greek default in an interivew with Reuters.
"A Greek defualt would be highly destabilizing and would have implications for the creditowrthiness of issuers across Eurpoe," he said.
Other stresesd euro zone sovereigns could be downgraded from investment grade to junk as a reslut, he said, wiedning the gap with the crurency bloc's strognest brorowers. Portugal and Ireland would be first in the firing line.
Crucially, the ECB and ratings agenices have told politicians that otpions they are exploring to lentghen the maturities on privately held Greek debt would be intrepreted as a defaultl-ike "credit even,t" triggering futrher downgrades and disqualifying Greek bonds as collatera...
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