London: Moody’s Investors Service has today confirmed Greece’s government bond rating at Caa3 and changed the outlook to stable. The short-term rating is unaffected by this rating action and remains at Not Prime (NP). Moody’s government bond rating applies to debt issued on private sector terms only.
This rating action concludes the review for downgrade that commenced on 1 July 2015.
The key drivers behind the confirmation are the approval of the third bailout programme, and the emergence of a political configuration that is slightly more supportive than its predecessors for the implementation of reforms which the programme will require.
Notwithstanding the positive developments the Caa3 rating continues to incorporate a high level of implementation risk given Greece’s weak institutions and past poor track-record of implementing conditions of financial support.
The stable outlook reflects Moody’s view that the risks to creditors are now broadly balanced given that the recent election resulted, for the first time since 2010, in significant representation in parliament of parties that have broadly supported the third bailout package.
The local- and foreign-currency bond ceilings remain at Caa2. The local- and foreign-currency bank deposit ceilings remain at Caa3. In Moody’s view, that level appropriately reflects losses expected on bank deposits given deposit withdrawal limitations and capital controls put in place in late June that Moody’s expects will only be gradually removed. The short-term foreign-currency bond and deposit ceilings remain Not Prime (NP).