S&P: Fiscal flexibility ‘average’

Greece has a fiscal flexibility that is about average for Europe, Standard & Poor’s Ratings Services said in a report published recently. The report, titled «The 2006 Fiscal Flexibility Index: Gauging European Sovereigns’ Room for Maneuver,» analyzes fiscal flexibility index (FFI) scores for 28 countries in the region, of which Greece (A / Stable / A-1) ranks 15. As the measurement of fiscal flexibility forms a crucial factor in the sovereign ratings process, Standard & Poor’s has sought to quantify in a consistent and comparable way the varying degrees of flexibility enjoyed by investment-grade European sovereigns. To this end, a revenue flexibility index (RFI) and an expenditure flexibility index (EFI) have been developed and combined into a joint FFI. The index allows for cross-country comparisons of governments’ ability to adjust to adverse economic trends, and to react swiftly and effectively in the wake of economic shocks, by modifying tax and expenditure policies in a way that safeguards smooth debt-service payments. «On the revenue side, Greece ranked 8, while on the expenditure side, it ranked 19,» said Standard & Poor’s credit analyst Trevor Cullinan. «This shows that Greece has average fiscal flexibility thanks to its potential to expand its tax base, whereas its expenditure flexibility is below average.» The report, published on June 27, 2006, is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit analysis system, at