Fitch lowers Greek ratings outlook

Fitch Ratings revised downward the outlook on the country’s credit ratings to «stable» from «positive» yesterday after the government confirmed a higher-than-expected budget deficit for 2007, exceeding the European Union ceiling. The news came as the government is set to issue more 10-year state bonds today (at a 4.60 percent rate of return), in order to draw in at least 1.5 billion euros. This could even reach up to 2 billion euros, depending on demand. As a result, state borrowing will come close to the record level of 41 billion euros. The problem for the government is that its borrowing needs for 2008 have already exceeded the Economy Ministry’s target for the year. In the January-September period, state borrowing reached 39 billion euros, against an original target of 37 billion euros. By the end of the year, this is expected to rise to 44-45 billion euros. The government needs this high borrowing in order to cover the budget deficit, which has to be under 3 percent, given that it stood at 3.5 percent last year. Borrowing may increase even more this year, following the government’s measures to support the banking system, which would entail the issuing of special state bonds of up to 13 billion euros. That is provided that banks ask for the government’s help, but this will not count toward the budget deficit. (Kathimerini, Bloomberg)