Credit rating agencies “see” a stable government, which can implement critical reforms for the Greek economy and the market, after the June 25 elections. They consider that the foundations exist to continue the good course in structural changes, absorption of EU resources and achievement of high growth rates, stressing, however, that there is no room for complacency at all. The new government has a lot of hard work, they noted, adding that they expect the upgrading of Greece’s credit rating by the end of the year. The statements of the credit rating agencies are as follows:
UBS: Stability, reforms and investment grade ahead
“Greece has made a lot of progress in the last few years, both in terms of reforms and economic growth. Last year’s GDP growth of 5.9% was nearly double that of the Eurozone average. If Greece secures the 3rd tranche of EU funds, total payments to Greece would reach 12.8 billion dollars (6% of GDP) from the RRF funds. The previous New Democracy government has demonstrated fiscal discipline, often outperforming expectations, and the recent high inflation levels have helped lowering the debt ratio by about 40 percentage points from 206% in 2020,” Themis Themistocleous, Head Chief Investment Office EMEA, UBS Global Wealth Management, said in statements to “Naftemporiki”.
“The election of New Democracy with an outright majority, allows it to form a stable government without the need for a coalition partner. The elections were an important milestone, as much for the prospect of more reforms as for the continuation (no reversal) of past reforms, and timely absorption of RRF funds. I would expect rating agencies to be encouraged by the stability provided by the election results and the comments of the prime minister regarding further reforms. We expect at least one rating agency to upgrade Greece to IG this year,” he added.
Bank of America: A lot of work for the new government, but the markets are on its side
“Markets were looking for a stable and strong government that can implement the broad reforms needed and take full advantage of EU funds after the elections, and this is exactly what we have now,” Athanassios Vamvakidis, managing director, head of G10 FX strategy in Bank of America Merrill Lynch, said in statements to “Naftemporiki”.
“Clearly a very positive outcome for Greek assets, as they are now fully pricing an upgrade to investment grade, hopefully by the end of the year. Yields on Greece are down to pre-crisis levels, but Greek stocks could have more upside room. Investment in the economy has improved in recent years but remains below pre-crisis levels and there is still room for improvement. As the prime minister said after the elections, the new government has a lot of work to do. Markets are on their side during this extremely important effort,” he underlined.
Moody’s: Election result is credit positive
Moody’s said that the outcome of the elections and the outright majority of New Democracy is credit positive, underlining that it paves the way for the continuation of fiscal and economic policy. “The continued focus on improving the business climate and the health of the banking sector, combined with the implementation of the milestones and reforms within the framework of the National Recovery Plan of Greece, will support economic growth.”
DBRS: Greece’s election result secures policy continuity
The election results will most likely bring another period of political stability to Greece and secure policy continuity, allowing the new government to implement reforms and investments. The majority government will provide legislative stability at a time when Greece hopes to manage its EU funds to boost economic prospects. Furthermore, reforms in the health and justice system, reducing inequality, and setting new policies to deal with Greece’s ageing population – including by establishing a new Ministry of Social Cohesion and Family dedicated to the demographic issue – appear to be high on the new government’s agenda. “Greece’s election result secures policy continuity,” said Nichola James, Co-Head of Global Sovereign Ratings.
“The continuation of structural reforms and growth-enhancing investments, within a framework of fiscal discipline, could continue to help improve Greece’s creditworthiness.”
