Resolution on the Greek sovereign situation will not be enough to stave off the contagion effect to the rest of the region.

It can also indirectly destabilize structured finance transactions in the affected regions, according to a Fitch Ratings report.

The fact that most Eurozone countries either have a negative outlook or are on rating watch negative reflects ongoing investor skittishness and financial market volatility. It does not seem as if it will improve anytime soon, the rating agency said.

"We continue to believe that the crisis will be protracted, but we still don’t expect any systemically important sovereign to be allowed to default," said Tony Stringer, managing director in Fitch’s sovereign ratings.

Fitch does not expect any systemically important financial institution or sovereign to be allowed to default. However, it said it does expect pressure will increase on banks in the affected regions.

The strength of the banks is crucial to ensure that there is a viable number of counterparties eligible to offer support facilities.

"It doesn’t matter whether you support the bank as a going concern: if someone is going to lose money, we are rating to that loss," said Bridget Gandy, co-head of EMEA financial institutions. "This means that the rating is going to come down. We think that states will continue to support systemically important banks in Europe in the near term, though that likelihood may diminish over time."



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