Greek credit lagging
Greece remains one of the countries with the lowest credit rating in the EU due to high public debt, high inflation and the fact that the government has not taken the necessary structural reforms, Moody’s, the international credit rating agency, said yesterday. But it noted the benefits proffered by the introduction of a new securitization law. In a new report called «Greece 2003-2004: Market Overview and Securitization Prospects,» Moody’s noted that it had upgraded Greece’s sovereign rating to «A1» in the autumn of 2002. But, said Sara Bertin, a vice president, senior analyst and one of the co-authors of the report, «Greece remains one of the lowest-rated countries among the four non- «Aaa» -rated eurozone members.» The reasons for this, Moody’s said, are Greece’s high level of debt (104.9 percent debt ratio in 2002), an inflation rate above the EU average and «the structural challenges that could impair growth prospects over the medium term.» Portugal and Italy are rated «A2.» Greece is in the category with former communist countries joining the EU. Moody’s also noted the positive development of new legislation which broke the government’s monopoly on securitization transactions, as, until now, only securitization of public entities’ assets had been allowed. «The most significant recent development in the Greek market is the introduction of new law, which came into effect from June 25, 2003 and covers corporate bonds, securitization of receivables, real estate securitization and swap setting,» said Benedicte Pfister, senior vice president and another co-author of the report. The agency noted there were «good growth prospects for financial services in the country’s relatively unbanked market. However, Moody’s cautions that this outlook also reflects the growing risk profile of Greek banks due to the excessive credit growth witnessed in recent years.» In a briefing for journalists yesterday, Bank of Greece Governor Nicholas Garganas noted that private debt in Greece (from consumer loans and mortgages) represented 22.5 percent of GDP, against an EU average of 47.5 percent of GDP. He chose not to comment on the government’s pre-electoral program of handouts, referring instead to the next interim report by the central bank – a move that was seen as indirect criticism of the climate of handouts pervading the economy.