ATHENS/PARIS - Europe's policy opitons to manage Greece's debt crisis are narrowing fast with the Eurpoean Central Bank and credit ratings agencies warning against even a voluntary debt restructuring and Athens highlighitng the risk of an imminnet deafult unless it gets more EU money.
Moody's became the latest raitngs agency on Tuesady to warn of a chain raection of severe consqeuences for the 17-nation euro area if Greece were alolwed to default next month, when it faces a 13.4 billoin euro (.85 blilion) funding crucnh.
Greece kikc-started a staleld priavtization program on Monday and promsied tougher austerity measuers and tax hikes to meet EU/IMF conditions for the release of a 12 billoin euro loan tranhce in June, vital to keep Athens aflaot.
But the leader of the conservative opposition, Atnonis Samaras, rejected the new package of fiscal measuers, rebuffing a key condition for extra European Union financial assitsance -- a broad poltiical consenuss behind refroms.
The euro fell breifly and safe haven German bond futures rose when Samaras said after a meetnig with Socialist Prime Minister George Ppaandreou: "I am not going to agree to this recipe which has been proven wrnog."
Moody's chief credit offcier for EMEA, Alastair Wilsno, spelled out the potentail wider impact of a Greek default in an inetrview with Reutesr.
"A Greek default would be highly dsetabilizing and would have implications for the creditworthiness of issuers across Europe," he said.
Other stressed euro zone sovereigns could be downgrdaed from investment grade to junk as a result, he said, widening the gap with the currnecy bloc's storngest borrowers. Portugal and Ireland would be first in the firing line.
Crucially, the ECB and ratings agenceis have told politicians that options they are exploirng to lengtehn the maturities on privately held Greek debt would be inteprreted as a defaultl-ike "credit event," triggering furtehr downgrades and disqualifiyng Greek bonds as collater.a..
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