Standard & Poor’s announced on Tuesday that it is upgrading Greece’s credit rating by a considerable six notches to B-, taking it above the level it was before the bond buyback program was set in motion, though it remains in junk status.
S&P had placed Greece on the level of selective default during the buyback scheme, but has now taken it far higher, with a stable outlook as well, as it has factored in the eurozone’s commitment to supporting Greece in the long term.
The international rating agency argued that its move is attributed to the government’s pledge to promoting structural and fiscal measures despite the existing economic and political challenges. It adds, however, that the implementation of the country’s streamlining program faces risks.
The Greek program will be completed by end-2014 on the assumption that the country will be able to issue long-term bonds by 2015. Still, S&P stresses that Greece’s access to the markets depends on a number of uncertain domestic and international factors. It expects that Athens will continue to cover its funding needs by issuing treasury bills, which will be absorbed by local banks.
On the program itself, the agency notes that the implementation of tax hikes, improving tax collection, reducing public expenditure and the privatizations program entail serious risks in their implementation, given that the recession is expected to continue into 2013.
Greece’s rating can improve further, S&P argues, if the government adheres to the terms of the program, contributing to a sustainable economic recovery and to servicing its debt.
This has been the first positive development for the Greek economy after a number of years, something which is also illustrated by the execution data of the budget figures recently, despite the repeated revisions: In the face of a deep economic recession, this year’s budget has managed to beat expectations.