By Marc Jones
FRANKFURT (Reuters) - Greece could be in restricted default on its debt for as little as a few days if it manages a planned bond swap properly, Fitch's head of sovereign ratings said on Friday.
The ratings agency said earlier in the day that Greece would fall into a temporary, "restricted," default as the result of a second bailout deal hammered out by euro zone leaders on Thursday which will hit private bondholders.
In a telephone interview with Reuters, David Riley, the head of the firm's sovereign department, said the default tag could be lifted quickly if handled correctly.
"A few days is not an unrealistic expectation," he said.
"It largely depends on how quickly they can process the transaction ... Our expectation is that they would look to do this in a way that would minimize the period of time in which the rating was in default."
Riley said the restricted default status would take effect once Athens has the necessary participation to go ahead with its bond swap, and be lifted again once the new bonds were issued and in the hands of investors.
The length of the default has particular significance.
Euro zone governments will have to stump up a 35 billion euros guarantee for the period it is in force, to persuade the European Central Bank to continue accepting Greek sovereign debt as collateral in its lending operations.
Riley said the new bonds are expected to have a rating of single B, or CCC.
"Low speculative grade is single B or CCC. One of the things we need to see is what the Greek debt profile looks like afterwards," he added.
The EFSF, which was given significant new powers by euro zone leaders as part of their pact agreed on Thursday, will retain its top rating despite its overhaul.
"The additional operational flexibility the EFSF has been given will not imperil its AAA rating, that is based on the guarantees of the euro zone members and in particular the AAA guarantors," Riley said.
However, it was too early to say whether increasing, or even doubling the size of the EFSF, as some policymakers have suggested should happen, would have an impact on the ratings of big contributors such as France.
For Ireland and Portugal -- the other euro zone countries receiving bailouts -- the decision to reduce the interest rate on EFSF loans and extend their run time would clearly help them but did not alter the underlying problems.
"I don't think in the near term it will change that (negative outlooks on ratings of Ireland and Portugal)" Riley said.
"Ultimately the stabilization of their ratings really rests on the austerity and reforms, and growth. Can these economies really recover."
(Reporting by Marc Jones; editing by Patrick Graham/Ruth Pitchford)