Fitch Ratings yesterday affirmed Greece’s long-term foreign and local currency ratings at “A.” The outlook remains stable. The short-term foreign currency rating has been affirmed at “F1” and the country ceiling at “AAA.” Greece’s sovereign ratings continue to be supported by consistently strong economic growth, one of the highest in the euro area, and by an economy that is relatively high value-added and diverse in comparison with many others in the single “A” category, Fitch said.
The financial sector is amongst the strongest in the single “A” category and poses minimal risk to macroeconomic stability or public finances, while membership of the euro area shields Greece from potential balance of payments crises and shocks. Greece’s rating is constrained, however, by the highest public debt burden of any sovereign rated in the single “A” category and the severe weaknesses in public accounts data, which have undermined the credibility of its fiscal policy. “Reducing tax evasion and exercising greater control over public expenditure is essential for successful fiscal consolidation, as is a commitment to restoring confidence in the credibility of Greek fiscal data and policy,” says Chris Pryce, a Director in Fitch’s Sovereign Ratings Group.
However, Greece faces major economic and fiscal challenges from its aging population and further reform of the public sector and the pension system will be required to secure sustainable public finances over the medium term. Further fiscal consolidation and a steady reduction in the public debt to GDP ratio, supported by structural reform in support of economic growth and medium-term sustainability of public finances could prompt an upgrade in Greece’s sovereign ratings.
(Kathimerini, 27/11/05)