Rating agencies are not concerned whether Greece will opt for a “clean exit” or a precautionary credit line as far as any upgrades of Greek bonds out of junk status to investment grade are concerned. What matters is that Greece is under strict supervision – with terms and conditions – which requires the implementation of the agreed reforms.
That is the upshot of four big agencies’ responses to Kathimerini, clearly rejecting Finance Minister Euclid Tsakalotos’s statement that “the rating agencies will not upgrade Greek bonds if Greece resorts to a precautionary credit line.”
Kathimerini asked Moody’s, DBRS, Fitch and Standard & Poor’s whether resorting to a credit line would be a credit negative event for the country and prevent them from raising its bonds to investment grade.
Kathrin Muehlbronner, senior vice president at Moody’s Investors Service, said that the precautionary credit line would not be a negative development for Moody’s assessments. She argued that for her agency the existence of increased surveillance, complete with terms and conditions, is key, “so that the Greek authorities remain focused on sensible fiscal policies and the reform course. A precautionary credit line would support that,” she said.
DBRS shares this view: Nichola James, co-head of sovereign ratings at the Canadian agency, told Kathimerini that the option of a precautionary credit line would not be a negative factor in the assessment of Greek bonds.
Fitch also does not view whether Greece prefers a “clean exit” or a credit line as significant. As Michele Napolitano, head of Western European Sovereigns at Fitch, said, Greece and its official creditors are expected to seek a hybrid clean exit, which may not be a credit line as such, but would still include significant conditions.
Likewise Aarti Sakhuja, sovereign analyst at S&P Global Ratings, said that a post-program surveillance framework along with the continued easing of the national debt would consolidate the reform momentum and be positive for investor confidence, assisting in the full financing of Greece by the markets.