Financial markets have overreacted to the euro area's sovereign debt problems, though they are likely to keep testing the region's commitment to the single currency, credit rating agency Fitch said.
The knock-on has gone a bit too far, Fitch sovereign credit analyst Brian Coulton said of the crisis that has spread from Greece to other euro zone periphery countries and raised questions about the viability of the currency bloc.
Portugal, Spain, Ireland and even Italy have been swept along with market fears about surging deficit and debt levels. But they are in qualitatively different position to Greece, having already taken tough policy decisions in response to the crisis, Coulton said.
A lot of problems in Greece are specific to Greece, Coulton told reporters on the sidelines of a financial conference.
Many euro area politicians, particularly those from the southern European states worst affected by the market ructions, have blamed credit rating agencies for contributing to the sovereign crisis with downgrades that appeared to ignore government and international efforts to bring state finances back into line.
Fitch currently rates Greece at BBB-, the lowest investment-grade level, with a negative outlook, which implies more than 50 percent possibility of a downgrade.
It has no plans to cut Greece's debt to non-investment grade in the immediate future, it said on Monday, after Moody's cut Greek sovereign debt to junk status.
Fitch also has a negative outlook on Portugal but mainly due to worries over the economic outlook rather than policy, Coulton said. Ireland and Spain have stable outlooks.
Financial markets were likely to continue testing policymakers' commitment to the euro bloc as long as residual doubts remained, Coulton said, adding that the European Central Bank ought to be more active in attenuating the crisis.
The crisis was largely a question of the market's perception of the political coherence of the bloc, since the debt was internal to the euro area.
There could be further volatility, Coulton said, adding that he considered the risk of a break-up of the euro area in the short to medium term to be remote.
Government debt levels have jumped sharply in response to the financial crisis and Coulton said a return to lower debt levels was off the agenda even in the long term, with countries struggling now just to get deficits under control.
Asked when euro government debt levels might revisit their pre-crisis levels, Coulton, 43, said: Perhaps when my children get close to retirement.
(Reporting by Jonathan Gould; editing by John Stonestreet)