Moody's Investors Service, ("Moody's") has today upgraded Greece's issuer rating to B3 from Caa2. Greece's senior unsecured bond and program ratings were also upgraded to B3/(P)B3 from Caa2/(P)Caa2. The outlook remains positive. The Commercial Paper and other short-term programme ratings were affirmed at Not Prime/(P)Not Prime.
The key drivers for today's rating action are as follows:
1. Greece has achieved material fiscal and institutional improvements under its current adjustment programme, which Moody's believes will be sustained in the coming years. Those improvements in turn should help support the recovery of the economy as well as the banking sector;
2. Moody's believes that Greece will successfully conclude its third support programme and return to self-sufficiency and market-based funding. Its "clean" exit will be supported in the near term by a substantial cash buffer and over the medium to long term by the strong commitment of Greece's euro area creditors to providing further debt relief;
3. The risk of another default or restructuring on the debt owed to private investors has therefore materially declined, and the uncertainty around that judgment has also diminished materially. While Greece was at a similar juncture in mid-2014, Moody's believes that the risk of reversal and derailment of the fiscal and economic progress achieved is now materially lower.
The outlook on the ratings remains positive. Moody's could further upgrade the rating if the reforms implemented over the course of the programme yielded results that are more positive than expected, leading to sustained economic growth and a more rapid decline in the public debt ratio in the context of a stable political environment.
The long-term country ceilings for foreign-currency and local-currency bonds have been raised to Ba2 from B3, to reflect the reduced risk of Greece exiting the euro area. The long-term ceilings for foreign-currency and local-currency deposits have been raised to B3 from Caa2. The depositceilings remain aligned with the government bond rating to reflect the ongoing capital controls. The short-term foreign-currency bond and bank deposit ceilings remain unchanged at Not Prime (NP).
