On July 21st, Standard & Poor's, a well known international rating agency headquartered in the USA, upgraded Greece’s credit ratings – both in national and foreign currencies. The ratings went 2 steps up from CCC- up to CCC+, with a stable forecast, Market Leader reports.
At the same time, S&P confirmed the country’s short-term ratings, thereby preserving them at level C, with the same stable forecast. The press release says that thanks to the ratings upgrade, Greece is going to to improve its access to liquidity, especially after last week’s agreement to provide Greece with another financial aid within the scope of a 3-year ESM-based program. At the same time, the Greek government has got a bridge loan – over 7 billion EUR for 3 months – in order to settle accounts with the IMF.
The CCC+ rating tells us about balanced risks for Greece. At the same time, the rating agency may well improve the rating even further if the local government improves the odds of cutting the sovereign debt. At the same time, if the Greek authorities are successful in performing efficient structural reforms as promised, Greece may also count on further rating upgrades.
At the same time, the rating agency warns that if the ESM program is suspended, this may result in rating cuts fro Greece since in this case Greek banks will stop getting financial inflows, which may undermine the entire financial system and economy of Greece.
It should be reminded that it’s been slightly over 3 weeks since the last time S&P downgraded Greece’s ratings one step down – from CCC down to CCC-, with a negative forecast. This happened on June 29th, a day before Greece failed to settle accounts with the IMF.
On July 20th, Greece paid the IMF 2 billion EUR shortly after receiving the mentioned bridge loan (a short-term loan) from the Euro Group.
At the same time, on July 16th, the Greek parliament voted for introducing the mentioned structural reforms required by the troika of lenders to provide Greece with further financial support. The reforms have a lot to do with even deeper austerity. It should be noted that this happened even despite the results of the recent referendum, where most of the Greeks said NO to reforms and austerity. Now, Greece is expected to receive some 86 billion EUR of financial support over the next 3 years. At the same time, some IMF experts are sure that this is not going to save the day for Greece. It is necessary to extend the loan all the way up to 30 years while writing off a considerable share of the existing debt. They say this is going to help a lot.
