BERLIN — German Chancellor Angela Merkel warned Tuesday against putting too much weight on rating agencies' assessments of new bailout proposals for Greece that will see private creditors share part of the burden.
Merkel told reporters that the troika of institutions lending money to Greece — the International Monetary Fund, the European Central Bank and the EU Commission — should make their own assessment regardless of what the credit rating agencies say.
"I trust above all the judgment of those three institutions," Merkel said.
Her comments came a day after Standard & Poor's said the current French proposal to have banks rollover their Greek debt holdings "would likely amount to a default."
A major worry in the markets is the potential insurance claims on Greek bonds that could be triggered if the rating agencies conclude that Greece was in a so-called "selective default" in the event of banks and other financial institutions altering their Greek debt holdings.
For months, Merkel has put a lot of stock in the assessment of Greece's financial situation made by the troika and by the IMF in particular. Merkel was instrumental in getting the Washington-based institution involved in resolving Europe's debt crisis in the first place.
The chancellor has also said that she would welcome the creation of a European rating agency to counter the dominance of the U.S. market leaders, but insisted that it had to be driven by the private sector, not by government.
A second bailout for Greece beyond the current €110 billion ($159 billion) package is currently being discussed. The Greek government has conceded that it will need more money to make bond repayments because it's not in a position to tap financial markets.
The hope among European policymakers is that the discussions will be completed by September. Rather than bearing the entire cost of a second bailout, eurozone countries are looking at ways to get banks and other financial institutions involved.
French and German banks are among the biggest holders of Greek sovereign debt — €15 billion ($21 billion) and €16 billion ($23 billion) respectively, according to the Bank of International Settlements.
The French banks have made the most comprehensive proposals to date, though German banks have also indicated that they are willing to countenance some form of rollover too.
S&P's warning came in the wake of last month's decision to slap a triple C rating on Greece — leaving Greece at the bottom of the pile of 131 countries the agency rates.
The other two major agencies, Moody's and Fitch, which rate Greece moderately higher than S&P, have yet to issue a stance on the French proposals.