Fitch upgrade Greece debt, sees steady improvment

WASHINGTON

Credit rating agency Fitch has upgraded Greece’s debt by a notc, citing what it called an improving outlook and amid expectations the country’s debt sustainability will steadily improve.

A month after Athens returned to credit markets with a bond issue for the first time in three years, Fitch boosted the debt rating to B- from CCC, with a positive outlook, which indicates the possibility of further upgrades.

“Fitch believes that general government debt sustainability will steadily improve, underpinned by ongoing compliance with the terms of the European Stability Mechanism (ESM) programme,” the agency said.

It also cited “reduced political risk, sustained GDP growth and additional fiscal measures legislated to take effect through 2020.”

“The successful completion of the second review of Greece’s ESM program reduces risks that the economic recovery will be undermined by a hit to confidence or by the government building up arrears with the private sector.”

The upgrade is good news for the crisis-beset country that came close to default.

Early last month, eurozone finance ministers approved the latest 8.5 billion euro ($9.9 billion) disbursement of the bailout, just in time for Athens to meet major debt repayments.

The ESM will keep feeding the country with low interest rate loans until the end of the bailout programme in July 2018.     The Greek economy nearly collapsed in 2010 under a mountain of debt and it had to be bailed out by its eurozone partners three times to prevent it bringing down the single currency bloc.

And it was locked in talks for years with the eurozone and the International Monetary Fund over the need for further debt relief. The EU has promised to provide debt relief but the specifics have not yet been agreed.

Fitch noted that the Eurogroup in June “confirmed its commitment to implementing a set of debt relief measures.”  

“This should support market confidence, which will help support post-program market access,” the agency said.

It added that “the political backdrop has become more stable and the risk of any future government reversing policy measures adopted under the ESM program is limited.”