Fitch is out with its Mid-Year Sovereign Review and Outlook report. 

Titled No Getting Away from the Eurozone Crisis, the report walks through recent developments in sovereign ratings and trends that have been followed closely by the market and reported extensively in the media this year.

Right away, the report warns about Europe:

Eurozone Entering Danger Zone: The severity of the systemic crisis engulfing the eurozone intensified in Q212 and is unlikely to diminish until European leaders articulate a credible and substantive roadmap that would complete monetary union with greater fiscal and financial integration. Downward pressure on the eurozone members‟ sovereign ratings will intensify unless there is a credible path to closer union and a more coherent and united policy response including further boosting the financial backstops against contagion.

Fitch also provided an outlook for how sovereign ratings would be affected should Greece exit the euro:

In the event of a Greek exit, or it becoming probable in the near term, Fitch would place all eurozone sovereigns on [Rating Watch Negative] and likely downgrade peripheral country ratings. This would be based on the risks of contagion and the fundamental change in the nature of the eurozone from an irrevocable currency union after an exit precedent. 

If a strong and effective response by EU policymakers forestalled significant contagion, then most ratings would likely be affirmed. However, if there were material contagion (such as bank deposit runs, accelerating capital flight and a loss of government market access) to the periphery and rising contingent liabilities facing the core, then Fitch would likely downgrade all eurozone sovereign ratings.

Much of the report addressed what you might expect from a report on sovereign debt ratings.  In particular it warned about countries running large deficits, saying they could come under pressure from raters as well, and that there may not even be anything these countries can do at this point to prevent further downgrades. From the report:

The ratings of sovereigns with large structural budget deficits, sharply rising public debt ratios and weak growth prospects – and therefore facing the growth versus austerity conundrum –– are likely to be under downward pressure. Several sovereigns facing this predicament have already been downgraded, while others are on Negative Outlooks. 

From such an unfavourable starting position, there is probably no policy mix that can prevent painful economic outcomes or potential ratings downgrades. Fitch understands that fiscal consolidation will have a short-term output cost and its impact is incorporated in its baseline forecasts. But it may take additional negative action where the trade-off proves to be worse than expected and the adjustment path back to sustainability is more costly and uncertain.

Good policy helps. Countries that set out a credible fiscal consolidation programme, pursue growth-enhancing structural reforms and implement austerity measures with low fiscal multipliers (as in the section above) can improve the growth/consolidation trade-off and minimise the adverse economic and rating impact. An adjustment is more likely to be successful where there is strong social cohesion and broad political understanding of the need for austerity.

The whole report is available at Fitch.com.