LONDON (MNI) - A bailout for Greece is not completely out of the question but the likelihood of it happening is not strong enough for Fitch to base its ratings outlook on, Fitch Analyst Brian Coulton said Tuesday.

In a teleconference today, Coulton said, "we don't believe a bailout is out of the question, but we don't believe the likelihood of it either is strong on which to base our rating judgement".

Coulton said that he though the European Central Bank is very unlikely to be involved in any bailout, nor the European Investment Bank. Joint International Monetary Fund/EU support in some form would be a more likely, he added.

"The more I thought this through, the more I thought the IMF is a sensible route to go for Europe in the sense that if the lending is from the IMF it does not contradict the no-bailout clause in the way that other sorts of lending support would run into legal difficulties," Coulton said.

But if political will emerged for such a bailout plan, Coulton said that he was confident it could be delivered:

"If there was a will we believe there would be a way and this help could be delivered effectively".

Coulton said that the idea of a bailout went so clearly against the EU Treaty's no bailout clause that it would be difficult for the ECB to get involved:

"It goes very much against the core principle of the EMU as a monetary but not a fiscal union," he said.

"However, with all bailouts ... there is clearly a point where concern about moral hazard would give way to systemic risk and this clearly relates to the issue of contagion".

Coulton noted that contagion fears had already led to a weakening of the euro in global FX markets in recent weeks but added that the idea of an EMU breakup "is somewhat exaggerated" and said the scenario of any country leaving was 'extremely low risk'.

On Greece itself, Fitch Greece analyst Chris Price noted that there was 'considerable support' for the government's fiscal efforts in opinion polls.

"It is critical the Greek government delivers and is seen to be delivering on its fiscal measures it must also stand ready to enact further measures and set out in more detail its plans for 2011 and beyond if it is to secure confidence in the long run solvency of the state," Price said.

Price said that the misreporting of Greek statistics had 'seriously undermined' the credibility of the government in sustaining fiscal austerity. The analyst said that some statement from the EU that financing support will be forthcoming if needed would be helpful to Greece's fiscal standing.

Fitch said that they would be looking to Portugal's Stability Pact update next week needed to show further fiscal consolidation worth 6% of GDP in the medium term:

"It's a tall order and it's a larger than the adjustment they made in 2005-06-07," a Fitch analyst said.

Fitch currently has Portugal on negative outlook.

One trigger for a downgrade would be insufficient consolidation plans or disappointment on budgetary outturns as well as higher funding costs over the medium term, the analyst said.

On Spain, Coulton said that the country had "acted relatively swiftly to reorientate the stance of fiscal policy toward consolidation and have set out a pretty ambitious consolidation programme and one which starts this year".

But there was a danger that the plan will delay recovery, Coulton said.

"Growth is the biggest risk to the consolidation programme and public debt sustainability, but this is much more of a slow burn risk and at this stage Spain remains within the tolerances of a triple A sovereign".