Greece at risk of downgrade to emerging market

New Delhi: Greece may have fended off an immediate exit from the Eurozone, but it now faces the risk of being downgraded from a developed to an emerging market status.

The process of demotion which usually takes years could be accelerated if Greece were to set up curbs on capital movement. The unprecedented switch will cut off Athens from investors in more sophisticated markets. Although it would open it up to fund managers who are more comfortable with risk.

The crisis has hurt Cyprus now with Fitch ratings agency on Monday downgrading its sovereign credit grade to junk status - citing a rise in the amount of rescue money needed by its banks which are heavily exposed to Greece.

Greece's new finance minister resigned because of ill health on Monday, throwing the government's drive to soften the terms of an international bailout into confusion days before a European summit.

Vassilis Rapanos, 64, chairman of the National Bank of Greece, was rushed to hospital on Friday, before he could be sworn in, complaining of abdominal pain, nausea and dizziness. Greek media said he had a history of ill-health.

The office of Prime Minister Antonis Samaras, who himself only took office last Wednesday following a June 17 election, said Rapanos had sent a letter of resignation because of his health problems and it had been accepted.

Samaras himself has only just emerged from hospital after undergoing eye surgery to repair a damaged retina. Both he and Rapanos had already said they would not be able to attend the June 28-29 European summit.

It was a worryingly chaotic start for the new government, formed after the second election in a month, which faces a rocky road in responding to huge domestic opposition to a harsh international bailout in the face of steadfast European opposition to any watering down of its terms.

Only hours before Rapanos's resignation, a hospital bulletin said he would be discharged on Tuesday. He had undergone a gastroscopy and colonoscopy, an official at the Hygeia Hospital told Reuters on condition of anonymity. The tests "showed everything is completely normal", it said.

According to a source from one of the three parties in the new coalition government, Rapanos had been under heavy pressure from his family to turn down the stressful job because of his health problems.

Earlier on Monday the three party leaders had announced a trans-Atlantic roadshow to try to persuade sceptical lenders to give them more time to repay the country's massive debt.

With additional information from Reuters