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Greece’s credit rating has been raised 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 raised Athens’ credit rating to Triple B, beginning what is widely expected to be a series of upgrades from “junk” territory.
In line with Greece’s “excellent” performance, the agency said, “the Greek authorities remain committed to their 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 three” institutions, its ratings are recognized by the European Central Bank and its opinion is highly influential within the euro area. For investors, Athens’ return to coveted investment-grade status is the latest sign of rebuilding after being pushed to the brink of bankruptcy and exit from the euro zone.
“Greece’s upgrade to investment grade is a sign that it can survive the crisis for many years,” said Alex Patelis, Prime Minister Kyriakos Mitsotakis’ chief economic adviser. “There is no room for complacency. We will continue to work hard to meet and exceed these new expectations.”
The update comes as welcome news for Greece, which has been hit by devastating wildfires and extreme floods 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 restoration of Greece’s investment grade status after many years is a very important development for our country, as our thoughts are with the victims of this unprecedented natural disaster and their families.” said.
Since the bailout program ended in 2018, Greece has regained access to its debt markets, with debt as a percentage of gross domestic product falling to 171% last year. In the second quarter of 2023, The country recorded the second fastest GDP growth rate in the EU.
DBRS also said that the improved creditworthiness “reflects stronger cooperation with the European Union and the Eurosystem institutions” due to past fiscal consolidation and reforms.
DBRS’s move comes as it operates on a “first best” principle among the four authorized credit rating agencies, meaning that Greek government bonds will automatically be subject to the ECB’s asset purchase program and the reinvestment of maturing bonds on the central bank’s balance sheet. means subject to The upgrade could also give Greek banks easier access to wholesale funding by expanding their collateral base.
During the early stages of the coronavirus pandemic, Greece was granted an exemption from the ECB’s requirement to only buy bonds with investment grade ratings. However, this scheme was scheduled to expire at the end of 2024.
“The upgrade gives the country full access to ECB liquidity,” said Dimitris Marialopoulos, chief economist at Greece’s central bank. “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.
However, this 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’s move “confirms existing speculation that this is the path that other rating agencies will follow.”