Moody’s gives Athens A2

Moody’s investor service yesterday assigned an A2 foreign currency and local currency issuer ratings to the City of Athens with a stable outlook. «The ratings reflect the city’s fast-growing economy, its satisfactory revenue profile, which features notable and growing own-source revenue streams, a moderate level of indebtedness and an adequate liquidity position. The ratings are constrained by the city’s narrow operating performance, its high degree of rigidity in operating spending and its significant investment needs,» said Moody’s. Almost 50 percent of the city’s operating revenues are derived from locally set taxes and charges, such as the fee for street-cleaning and lighting, which gives Athens revenues flexibility to face fiscal pressures as they arise. «These have been steadily growing, thanks to the municipal administration’s recurrent rate hikes, revenue collection improvements and the dynamic local economy,» says Simone Zampa, a Moody’s assistant vice president-analyst and author of the report. Moody’s notes that in 2004 Athens posted an operating deficit and a high financing requirement. «The city incurred extraordinary expenses as a result of hosting the Summer Olympic Games that year and accelerated its investment plan to improve public infrastructure. It also introduced new public services,» Zampa adds. Based on more recent financial data, operating balances have been restored and the overall budgetary position of the city has improved, although Moody’s still expects a deficit for 2005. The increase in capital investments required the city to find new sources of debt financing. However, Athens’s debt ratios are moderate when compared with those of its international peers. As the capital of Greece, Athens plays a key role as the financial, economic and political hub of the country. The region of Attica, in which Athens is located, accounts for almost 38 percent of national GDP and its GDP per capita is 7 percent above the national average, but 18 percent lower than the EU-25 average. In recent years, Athens has experienced robust economic growth sustained by high rates of investment – mainly to enhance the transportation network – linked to EU transfers and the 2004 Olympics, Moody’s noted. The issuance of this credit report by Moody’s Investors Service is an annual update to the markets and is not a formal action to alter the credit rating of the issuer.