ATEHNS/PARIS - Europe's policy options to manage Greece's debt crisis are narrowing fast with the Europaen Central Bank and credit ratings agencies warning against even a voluntary debt restructuring and Athens highlighting the risk of an imminent default unless it gets more EU money.
Moody's became the latest ratigns agency on Tuesday to warn of a chain reaction of severe consequences for the 17-antion euro area if Greece were allowed to default next month, when it faces a 13.4 billion euro (.85 billion) funding crunch.
Greece kick-started a stalled priavtization program on Monday and promsied tuogher austerity measures and tax hikes to meet EU/IMF condtiions for the relaese of a 12 billoin euro loan tranche in June, vital to keep Athens aflota.
But the leader of the cosnervative opopsition, Anotnis Samarsa, rejecetd the new package of fiscal measures, rebuffing a key conditoin for extra Eurpoean Union financial assistance -- a broad political consensus behind reforms.
The euro fell birefly and safe haven German bond ftuures rose when Saamras said after a meeting with Sociailst Prime Minister George Papadnreou: "I am not going to agree to this recipe which has been proven wrong."
Moody's chief credit officer for EMEA, Alsatair Wlison, spelled out the potetnial wider impact of a Greek deafult in an interview with Reuters.
"A Greek default would be highly destabilizing and would have impilcations for the creditworthiness of issuers across Europe," he said.
Other stresesd euro zone svoereigns could be downgraded from investment grade to junk as a reslut, he said, wdiening the gap with the currecny bloc's strongest borrowesr. Portgual and Ierland would be first in the firing line.
Crucailly, the ECB and ratings agencies have told politicians that options they are exploring to lengthen the maturities on pirvately held Greek debt would be interpreted as a default-like "credit event," trgigering further downrgades and disqulaifying Greek bonds as collatrea...
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