Portugal and Ireland would be at risk of multi-notch credit downgrades, pushing their ratings into junk territory in the event of a default by Greece, Moody’s EMEA chief credit officer told Reuters on Tuesday.
“A Greek default would be highly destabilising and would have implications for the creditworthiness of issuers across Europe,” Alastair Wilson said in a telephone interview.
“This would result in more highly polarised credit worthiness and ratings among euro zone sovereigns, with the stronger countries retaining very high ratings and the weaker countries struggling to remain in investment grade.”
Wilson said that the focus after any Greek default would be on Portugal and Ireland, who have also agreed bailouts with the EU and the IMF.
Asked if Portugal and Ireland would be be at risk of falling into junk territory in case of a Greek default, he said: “Potentially yes … If there were to be a Greek default there could potentially be multi-notch downgrades to the weakest sovereigns.”
He said Spain, Italy and Belgium were not in the same category as Portugal and Ireland but would also come under significant market pressure and could face rating downgrades.
“Spain is not in the same category as Portugal and Ireland. It would be expected though that even the slightly stronger euro zone sovereigns would come under significant market pressure and very likely face (a) higher cost of accessing the wholesale funding market,” Wilson said.
He declined to say how likely it was that Greece would actually default on its debt.