DBRS confirms Greece’s ‘CCC’ rating; says outlook remains ‘stable’

DBRS Ratings confirmed on Friday Greece’s long-term foreign and local currency issuer ratings at “CCC” (high) and its short-term foreign and local currency issuer ratings at “R-5”, adding that the trend on all ratings remains “Stable”.

“The CCC (high) rating reflects Greece’s very high level of public-sector debt and the political challenge that the Greek authorities and the institutional creditors face in placing this debt on a firm downward path,” the ratings agency said in a press release.

On the 2 May 2017, the Greek authorities reached a preliminary agreement with creditors on a policy package that includes fiscal and structural measures to support economic recovery. “While this agreement is a positive development, its conclusion has been delayed for months and DBRS remains concerned about long-term debt sustainability. Furthermore, banks’ weak asset quality and the high level of impaired loans constrain the banking system’s ability to support the economy and employment,” it added.

DBRS also said the “stable” trend reflects the agency’s view that the current official-sector financial support program for Greece has eased the financial-sector liquidity squeeze and stabilized the economy.
“The second review of the third economic adjustment program, on completion, should release an additional €7.4 billion in funds and prior actions, including fiscal and structural measures, should provide a stimulus to growth,” it said.

On the downside, the agency cautioned on the level of the public debt ratio, saying it is extremely high. It also said banks have high levels of impaired assets and firm economic recovery is not yet underway, while meeting the fiscal and structural reform adjustments of the program amid social constraints and the government coalition’s slim three-seat majority in parliament continue to be challenging.

“That said, the recent agreement with creditors on fiscal and structural measures is encouraging in DBRS’s opinion,” it concluded.