Moody’s Investors Service confirmed Greece’s sovereign bond rating at Caa3 late on Friday and changed the outlook to stable in the aftermath of the September 20 general elections.
The short-term rating is unaffected by this action and remains at Not Prime (NP). The Moody’s government bond rating applies to debt issued on private sector terms only. This decision concludes a review for downgrade that started on July 1.
Moody’s explained that the key drivers behind the confirmation are the approval of the third bailout program and the emergence of a coalition government that is slightly more supportive than the former administration of the implementation of reforms required by the bailout program.
The international ratings agency added, however, that despite these positive developments, the Caa3 rating continues to incorporate a high level of implementation risk given Greece’s weak institutions and past poor track record in implementing the conditions of financial support.
The stable outlook reflects Moody’s view that the risks to creditors are now broadly balanced given that the recent elections resulted, for the first time since 2010, in significant representation in the Greek Parliament and in the government itself of parties that have broadly supported the third bailout package.