Political stability in Hellas and continuity in reforms “see” S&P, DBRS And Application Ratings after Sunday’s election results and ahead of the second round on June 25, which implicitly but clearly points to the country’s upgrade to investment grade during their next assessments in the second half of 2023.

After all, Greek bonds are also valuing this development, with 10-year yield will fall to 3.85% on Tuesday and the spread against Germany will narrow to 138 basis points and the lowest level since November 2021. fluctuations, mainly influenced by the monetary policy of the European Central Bank and not “spooked” by domestic political events (such as the postponement of this year’s elections to May instead of early April after the Tempe railway tragedy). At the same time, it continues to record the biggest drop in the eurozone since the start of the interest rate hike cycle in July 2022, which is reaching 100 basis points, while the spread between Greece and Italy is now consistently negative and at its highest level in over a decade. the whole story. (48 basis points).

Election announcement

Ratings agency S&P notes that the election results indicate that there is a popular mandate to continue policies and reforms. At the same time, he stresses that he may upgrade Greece’s rating over the next twelve months after upgrading his outlook to positive in April, keeping the rating one notch below investment grade and at ‘BB’ if fiscal discipline is maintained in line with his forecast. period until 2026. “Modernization will also likely depend on whether the next government maintains the pace of structural reforms, thereby strengthening the country’s economic competitiveness,” adds S&P and recalls that its next verdict will be announced on October 20.

Increasing investment

From her side and DBRS notes that the result of the elections signals continuity of policy and a continuous course of reforms that can accelerate economic growth. “Despite persistent global economic challenges, investment growth in Greece may even exceed expectations this year,” the house estimates.

In particular, DBRS reports that if New Democracy manages to maintain its percentage in the runoff in June and if the percentage of votes for parties that remain outside parliament remains high, then the ruling party could win a strong absolute majority for N.D. “This will bring another period of political stability to Greece,” the chamber notes, “as the victory of N.D. this will oblige him to continue to carry out reforms and investments, increasing the growth prospects of the country.”

For now, the chamber says this development supports Greece’s further modernization: “Improved growth prospects from the expected spending of the Recovery Fund on reforms and investment is a factor that will contribute to a possible credit improvement in its valuation.” It is noted that the next DBRS verdict for Greece is September 8.

The positive developments are also reflected in Greek bonds, with the 10-year yield slipping to 3.85% on Tuesday.

Update signal is given Application Ratingsemphasizing that policy continuity from the expected re-election of New Democracy and the continuation of recent progress will positively affect creditworthiness in the long term and will support Greece’s creditworthiness, he explains.

Scope Ratings is not among the “recognized” rating agencies by the ECB, but intends to join this group soon. He has even shown lately that his decisions tend to be “followed” by other houses as he was the first to upgrade Greece’s rating to investment grade. As it is the first chamber since the second polls, delivering its verdict on August 4, it could also be the first to bring Greece to the investment grade milestone.

However, he said that to restore it for the first time since 2010, it is necessary to maintain the momentum of reforms, prudent fiscal policy and strengthening relations with Europe in the long term.

At the same time, the house emphasizes that Greece has experienced a difficult fifteen years, 2008-2023, when the Greek economy experienced a 30% drop in production. But the country persevered, adopting ambitious reforms and greatly improving its investment and economic competitiveness.

Tests

In any case, the “next day” problems are significant, he adds, as GDP remains well below 2008 levels, poverty rates are among the highest in the EU, and bad loans remain significant. the debt ratio should also remain at a very high level, while Greece should achieve high primary surpluses in the coming years.

The S&P, DBRS and Scope comments followed those of Moody’s, which also stressed on Monday that the likelihood of a new New Democracy presidency is increasing significantly, indicating fiscal and economic policy continuity, which is positive for Greece.

For its part, Fitch did not want to comment on the developments, as in about two weeks (June 9) it will announce its assessment for Greece, so that it is in a “calm period”.