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Greece’s credit rating was upgraded to investment grade for the first time since the debt crisis erupted more than a decade ago and led to three international bailouts.
DBRS Morningstar upgraded Athens’ credit rating to B on Friday, kicking off a series of widely expected upgrades from “junk” status.
The agency said the upgrade reflected its view that, consistent with Greece’s “impressive” record, “the Greek authorities will remain committed to fiscal responsibility and ensure that public debt ratios remain on a downward trend”. Greece is expected to post a primary fiscal balance surplus of 1.1 percent this year and 2.1 percent in 2024, DBRS added.
Although the company is not one of the “Big Three”, its ratings are endorsed by the ECB, giving its opinions huge sway in the euro zone. Athens’ return to coveted investment-grade status in the eyes of investors is the latest sign of a revival after being pushed toward bankruptcy and on the brink of exiting the euro zone.
Alex Patelis, chief economic adviser to Greek Prime Minister Kyriakos Mitsotakis, said: “Greece’s upgrade to investment grade is like a stamp of approval, firmly Crisis behind us.” “There is no room for complacency. We will strive to meet and exceed these new expectations.”
The escalation brings good news for Greece, which has been hit by devastating wildfires and extreme flooding in recent weeks, causing billions of euros in damage and heightening concerns about extreme weather patterns caused by climate change .
Greek Finance Minister Kostis Hatzidakis said: “The recovery of Greece’s investment grade after many years is a very important moment for our country as we focus on the victims of an unprecedented natural disaster and their families. development of.”
Since the end of the 2018 bailout, Greece has regained access to its bond market and reduced its debt-to-GDP ratio to 171% last year. In the second quarter of 2023, The country has the second fastest GDP growth rate in the EU.
The improved creditworthiness also “reflects increased cooperation with EU and Eurosystem institutions”, which has benefited from past fiscal consolidation and reforms, DBRS said.
The DBRS move means Greek debt automatically qualifies for the ECB’s asset purchase program and reinvestment of maturing bonds on the central bank’s balance sheet, as it operates on a “first best” basis among the four recognized credit rating agencies. The upgrade could also make wholesale financing easier for Greek banks, thanks to a wider collateral base.
In the early stages of the Covid-19 pandemic, Greece was exempted from the European Central Bank’s rules to buy only investment-grade-rated debt. However, that period will expire at the end of 2024.
“By escalating, the country can take full advantage of the ECB’s liquidity,” said Dimitris Malliaropulos, chief economist at the Bank of Greece. “This will have a favorable impact on Greek bond yields.”
Investors are not expecting a major reaction when the bond market opens on Monday, as Greek bonds are already at investment grade. Greece’s benchmark 10-year bond yield was 4%, lower than investment-grade Italy’s 4.3%. When prices rise, output falls.
But the upgrade brings Greek bonds one step closer to being included in investment-grade indices, which typically require a rating from at least one of the three main agencies — Standard & Poor’s, Moody’s and Fitch. That would open up Greek government debt to a wider range of investors, some of whom are banned from buying junk-rated debt under its mandate.
Richard McGuire, head of rates strategy at Rabobank, said DBRS’ move “supports existing speculation that other rating agencies will follow this path”.
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