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28 July, 2000
Fitch, the international rating agency, on Thursday upgraded Greece's Long-term foreign currency rating to 'A-' (A minus) from 'BBB+' and the Short-term to 'F1' from 'F2' in expectation of Greece entering EMU. The Long-term local currency rating remains at 'A-' (A minus). Consequently, the Rating Watch Positive is removed from all three ratings and the rating outlook is stable.
As in other euro-area countries, the long-term local currency rating will equal the foreign currency rating, as the government will lose the ability to monetize its debt.
The rating action anticipates Greece entering EMU on 1 January 2001, which is virtually certain, and also reflects positive developments in the economy. In order to participate in the euro area, the macro-economic environment has been greatly improved through tight fiscal and monetary policies.
There has been a steep decline in inflation to levels of 2 per cent from 20 per cent in the early 1990s. This has been aided through a decline in unit labor costs and wage moderation.
The general government budget deficit was reduced to well below the Maastricht limit of 3 per cent to 1.6 per cent of GDP in 1999, with the government aiming at a small surplus by 2002.
General government debt has also declined, by 6.9 percentage points to 104.4 per cent of GDP in 1999, although the fall has been slower than desired due to various 'sock-flow' adjustment items influenced by continued support to public enterprises. Debt still remains the third highest in the EU and a constraint on the rating. Social security reforms to control future pension problems would also be positive.
Source: Athens News Agency
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