Canada-based DBRS Ratings upgraded Greece’s main ratings one notch, from B to B (high), on Friday and maintained the positive trend, in an extraordinary review in the aftermath of last week’s Eurogroup decision to ease the country’s debt.
DBRS said it views the Eurogroup statement on Greece as warranting an extraordinary review of the sovereign rating. “The subsequent upgrade is underpinned by new medium-term debt relief measures and clarification on the size of the liquidity backstop included therein. DBRS views the debt relief as being supportive of public debt repayment capacity in the medium term. Following completion of the European Stability Mechanism (ESM) Third Economic Adjustment Program in August the liquidity backstop provides a precautionary funding buffer while Greece returns to bond issuance; and a portion of it is planned to be used to amortize debt,” the ratings agency stated.
It added that “the expected unprecedented activation of the European Commission’s quarterly reporting under the “Enhanced Surveillance” mechanism, in Greece’s case, linking additional beneficial financial measures to post-program policy commitments, is another positive rating factor. This should provide an additional incentive to encourage Greece to stay on course with structural reforms, thereby supporting economic growth.”
DBRS also observed that the Positive trend reflects the likelihood that Greece will continue on its reform path under the enhanced surveillance mechanism and gradually return to market funding, but added that “challenges include the still very high level of public debt and still weak banks’ asset quality.”