Fitch Ratings has downgraded Greece's long-term foreign and local currency Issuer Default Ratings by one notch to 'CC' from 'CCC'.

The issue ratings on Greece's senior unsecured foreign and local currency bonds have also been downgraded by one notch to 'CC' from 'CCC', the global ratrings agency said in a press release on Tuesday.

The Short-term foreign currency IDR has been affirmed at 'C'.

The key reason for the ratings downgrade was the breakdown of the negotiations between the Greek government and its creditors, “which has significantly increased the risk that Greece will not be able to honour its debt obligations in the coming months, including bonds held by the private sector”, Fitch said.

“We now view a default on government debt held by private creditors as probable.”

Another reason for the downgrade is the referendum called by the Greek government for 5 July on whether to accept the 25 June proposals of the creditor institutions regarding policy conditionality, Fitch said.

“Although early polls suggest a 'Yes' vote is the more likely outcome, the risk of a 'No' vote is significant. In our view, a 'No' vote would dramatically increase the risk of a Greek exit from the eurozone,” according to the rating agency.

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