ECB policymakers eye Vienna-style Greek debt deal; Fitch demurs

ECB policymakers talked up hopes a 2009 debt deal that helped stabilise central Europe might offer a model for a Greek rescue, but a rating agency said that risked taking the country to the brink of default.
Lorenzo Bini Smaghi said he hoped the 'Vienna Initiative', in which banks agreed to maintain their exposure to crisis-hit Central and Eastern Europe, would provide a template for Greece.
Asked by Reuters in Amsterdam whether the Initiative offered a way out of Greece's debt conundrum, he said: "I hope so, we are working on it, be patient."
Earlier on Wednesday, fellow ECB policymaker Erkki Liikanen said private sector participation in a second Greek rescue could be along the lines of the Initiative.
Mario Draghi, set to take over from Jean-Claude Trichet as head of the bank this autumn, said on Tuesday a deal akin to the Initiative might meet the criterion that private investor involvement be voluntary, averting a 'credit event' that would trigger a debt default.
Euro zone policymakers are keen to make private bondholders share the cost of the second Greek rescue in two years, but they have so far failed to agree how to without triggering even worse turmoil in financial markets.
Those concerns were reflected in comments from credit agency Fitch, which said on Wednesday it would likely view a Vienna-type Greek debt plan as a distressed debt exchange, leading to a ratings cut.
"Assuming there is an announcement of the Vienna Initiative ahead of the pre-commitment formalities being completed, Fitch would likely downgrade (Greece) … to 'C' at this time, reflecting an imminent default event," it said in a statement.
The Initiative was an agreement between the European Central Bank, the European Bank for Reconstruction and Development, regulators and banks with subsidiaries in central and eastern Europe.
Under it, parent bank groups publicly committed to maintain their exposures and recapitalise their subsidiaries in the region as part of aid packages from the EU and IMF.
That campaign focused primarily on loans while in Greece's case the discussion centres on bonds, giving rating agencies greater cause to get involved.
Credit agency peer Standard & Poor's slashed Greece's rating on Monday, warning any attempt to restructure would trigger a default, while Moody's said it might downgrade three top French banks for their exposure to the country's debt.
European Union leaders are aiming for a deal on Greece at a summit on June 23-24.