Is there scope for a midsummer surprise?
A huge surprise for Greece cannot be ruled out this summer. This has to do with a decision by the European Central Bank and concerns the inclusion of Scope Ratings in the group of rating agencies the ECB takes into account in its decisions.
In the last three years, Scope has started the procedures to obtain Eurosystem Credit Assessment Framework (ECAF) status from the ECB, which Fitch, DBRS, Moody’s and S&P already possess.
The procedures from the agency’s side have been completed, with only the ECB nod pending. This cannot be ruled out very soon, perhaps even in the coming weeks, which makes Scope’s planned assessment of Greece on August 4 particularly important, as it rates the country one notch before investment grade with a positive outlook. In the event that Scope becomes a member of the group currently known as the “Big 4,” then it would bring Greece’s inclusion in the international bond indices closer, though that requires an investment grade assessment by at least two big agencies.
However it would count for the programs of the Eurosystem and in the conventional and non-contractual monetary policies of the ECB, as Greek assets will automatically be eligible for any program that is running or will run in the future (the “waiver” that Greece currently enjoys expires in 2024). This is because for the ECB it is enough to have one investment grade rating. Of course, the biggest benefit for Greece will be the important signal that would give to the markets.
All of the above makes Scope’s verdict in about two weeks’ time extremely important. Very recently, the agency had also given a very important signal for a Greek upgrade: “The election result is a credit positive and supports examining Greece’s inclusion in investment grade,” as Dennis Shen, Scope’s chief analyst, had pointed out.
If Scope upgrades Greece, it will essentially trigger upgrades by the other agencies as well. Besides, it is very often that the big agencies follow Scope’s movement: For example, Scope was first in upgrading Greece to BB+ (in November 2021) and in giving it a positive outlook (in December 2022), with S&P following in its footsteps.
