Sun, Dec 01, 2013 - Page 13 News List

Greece rating raised on fiscal progress, economy

TARGETING GROWTH:Moody’s said it expects budget focus to remain on savings generated from structural reform measures as opposed to further spending cuts

Bloomberg

Greece’s credit rating was raised two levels by Moody’s Investors Service, which cited the country’s progress in fiscal consolidation and an improving economic outlook.

The country’s government bond rating was raised on Friday to “Caa3” from “C” and given a stable outlook, Moody’s said in a statement.

The ratings company said it expects Greece to “achieve [and possibly outperform] its target of a primary balance in 2013, and record a surplus in 2014.”

A “cyclical recovery in the economy” is another reason for the credit grade increase, Moody’s said.

The ratings company said it expects the government’s budget focus to remain on savings generated from structural reform measures as opposed to further spending cuts.

Under the accord with the troika of the European Commission, IMF and European Central Bank, posting a primary surplus will qualify Greece for additional debt relief.

The yield on Greek benchmark 10-year bonds was down 0.15 percent at 8.78 percent on Friday, having fallen from a peak of 34.96 percent in December 2011.

Investors often ignore ratings, as evidenced by the rally in US Treasuries after the US lost its top grade at Standard & Poor’s in 2011.

Yields on sovereign securities last year moved in the opposite direction from what ratings suggested in more than half of 32 upgrades, downgrades and changes in credit outlook, according to data compiled by Bloomberg.

Greece’s economy is expected to shrink 0.5 percent next year and expand 1 percent in 2015, Moody’s said in the statement.

The budget surplus is expected to be at about 1.5 percent of GDP next year, according to the statement.

The Moody’s ranking is nine levels below investment grade, while Standard & Poor’s and Fitch Ratings each rate Greece “B-,” which is six notches below the junk threshold.

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