Receive Free Updates on the Greek Debt Crisis
I will send myFT Daily Digest E-mail summarizing the latest information Greek debt crisis News every morning.
Greece’s credit rating was upgraded to investment grade for the first time since the debt crisis that erupted more than a decade ago and resulted in three international bailouts.
DBRS Morningstar on Friday upgraded Athens’ credit rating to triple B, beginning what is widely expected to be a series of upgrades out of the ‘junk’ territory.
In line with Greece’s “excellent” performance, the agency said, “the Greek authorities remain committed to fiscal responsibility, ensuring that the public debt ratio continues its downward trend.” Ta. DBRS added that Greece’s primary budget surplus is expected to reach 1.1% this year and 2.1% in 2024.
Although the company is not one of the ‘Big 3′ institutions, its ratings are recognized by the European Central Bank and its opinions are very influential within the Eurozone. For investors, Athens’ return to a much-needed investment-grade status after being pushed to the brink of bankruptcy and exit from the euro zone is seen as the latest sign of restructuring.
“Greece’s upgrade to investment grade is like a seal of approval and can weather the crisis for years,” said Alex Patelis, chief economic adviser to Prime Minister Kyriakos Mitsotakis. “There is no room for complacency. We will work hard to meet and exceed these new expectations.”
The update is welcome news for Greece, which has been ravaged by devastating wildfires and extreme flooding in recent weeks, causing billions of euros in damage, and raising concerns about extreme weather patterns due to climate change. Brought.
Greek Finance Minister Kostis Hadjidakis said: “The return of Greece to investment grade after many years is a very important development for our country as we think of the victims and their families of this unprecedented natural disaster.” said.
Since the bailout program ended in 2018, Greece has regained access to the bond market and its debt-to-GDP ratio fell to 171% last year. In the second quarter of 2023, The country recorded the second fastest GDP growth in the EU.
DBRS also said the improvement in credit quality “reflects increased cooperation with the European Union and Eurosystem institutions” from past fiscal consolidation and reforms.
The DBRS move operates on a ‘first-best’ principle among the four recognized credit rating agencies, so that Greek government bonds will automatically reinvest maturing bonds on the ECB’s asset purchase program and the central bank’s balance sheet. means subject to The upgrade could also make it easier for Greek banks to access wholesale funding as it expands its collateral base.
Greece was granted an exemption from the ECB’s rule to buy only investment-grade bonds in the early stages of the coronavirus pandemic. However, the scheme was due to expire at the end of 2024.
“The upgrade will give the country full access to the ECB’s liquidity,” said Dimitris Marialopoulos, chief economist at the Central Bank of Greece. “This will have a positive impact on Greek government bond yields.”
Investors are not expecting a big reaction when the bond market opens on Monday as Greek government bonds are already trading at investment grade levels. The benchmark 10-year Greek bond yield is trading at 4%, lower than the 4.3% yield on investment-grade Italian government bonds. As prices rise, yields fall.
But the upgrade brings Greek government bonds one step closer to being included in investment-grade indexes. Investment-grade indices typically require a rating from at least one of the three largest agencies: S&P, Moody’s and Fitch. That would open up the Greek government’s debt to a wider range of investors, some of whom are mandated to be barred from buying junk-rated bonds.
Richard McGuire, head of rates strategy at Rabobank, said DBRS’ move “reinforces existing speculation that this is the path other rating agencies are taking.”
