Fitch Declares Greece Deal a Default

With agreement on Wednesday between European leaders and financial institutions on a deal that could help ease Greece's debt burden, some investors hoped the current crisis could be on its way toward resolution. Those hopes were put on hold for a time on Friday when Fitch Ratings declared that it would consider the plan a default on the part of Greece, according to The Wall Street Journal.

The new plan calls for banks holding Greek bonds to accept a 50 percent loss in value to help reduce the country's debt load, allowing the country's second tranche of emergency aid to be doled out. European leaders hoped to avoid a default by making the write-down voluntary, but all three of the major ratings agencies had warned that they would still consider this a default.

With default essentially assured, Fitch projects that Greece's debt rating will likely fall at least as low as B, more than a dozen steps below the perfect AAA credit rating. Fitch was more positive about the improvement to the European Financial Stability Facility, but noted that Europe could not afford to delay in its implementation.

"Parallels with the euro-area summit of July 21, when a warm afterglow of confidence quickly dissipated, underline the importance of rapid and full implementation of the policy commitments," Fitch said, according to the news source. "Further bouts of financial market volatility appear likely and downward pressure on sovereign ratings will persist."

Bloomberg reports the euro has already fallen in response to the news.