Fitch upgrades Greece to A+

LONDON (Reuters) – Greece’s long-term foreign and local currency ratings were upgraded yesterday to A+ from A by credit ratings agency Fitch, which cited improving economic conditions. The outlook on the long-term ratings is stable, Fitch said. «The upgrade reflects a sustained improvement in the performance of the Greek economy in recent years, ongoing fiscal consolidation, including the gradual reduction in off-budget transactions,» the rating agency said in a statement. Fitch also cited further declines in the ratio of government debt to gross domestic product (GDP) as a reason behind the move. Greece is one of three eurozone states with a debt-to-GDP ratio above 100 percent. But the ratings agency added that further structural reform was needed to improve the competitiveness of Greece’s economy. Labor and pension reforms, in particular, were needed to underpin a further improvement in the country’s creditworthiness, Fitch said. «Labor markets must be made more flexible and competition encouraged in product markets. Wages should be restrained to promote competitiveness both within the euro area and outside it.» Financial markets showed little immediate reaction to the ratings upgrade and the yield gap between benchmark 10-year Greek government bonds and the 10-year German Bund was unchanged at around 12 basis points. «This is encouraging for the Greek bonds,» said Kornelius Purps, fixed-income strategist at Hypovereinsbank in Munich. «I would have expected any upgrade to happen after next year’s Olympic Games as there is a high-risk potential for public finances.»