Moody’s assesses Greece during a difficult economic and political climate

Tonight, Greece has its third and most critical appointment with a rating agency. The strictest evaluator of the Greek economy, i.e. Moody’s, is facing a difficult moment. The international markets are going through a new test, after the collapse of banks in the USA – and the rescue of Credit Suisse -, while the Greek economy has entered a highly tense pre-election period.

Under this climate, the agency is asked to rate Greece and the Greek debt. The country is one step behind investment grade, according to the three rating agencies S&P, DBRS and Fitch. The exception is Moody’s, which still holds Greece back by 3 notches.

Ahead of the spring elections, three Greek debt assessors have appeared in just 17 days. The agencies leave their mark on whether or not they will achieve investment grade in 2023. After the German agency Scope (BB+) in March, Canadian DBRS (BB high) followed,  and tonight Moody’s (Ba3).

The “Moody’s of silence” and Greek elections

The bets on the “silent” Moody’s are again focused on the main issue of whether it will publish a report and whether it will eventually proceed to upgrade the country’s credit rating. The reason is that the agency in question has Greece 3 levels lower than the investment category, in the “Ba3” category.

The Greek government expects a positive move by the house, in order to reduce the distance to the investment level. If this step is indeed taken, even in the midst of a banking turmoil, Greece will gain important points. It would also be a political boon to the government, which is receiving heat from citizens over the Tempi accident and blame for the train crash.

After all, the political factor has been measured by the agencies long ago. However, the new polls show new trends and the possibility of a long pre-election period. For this reason, Moody’s may not make an upgrade move and wait until the fall and after the elections are over. The next opportunity for Greece, from the agency in question, is on September 15.

S&P and Canadian DBRS

The next appointment for Greece is on April 21, as the first S&P assessment for this year is scheduled. The second scheduled appointment is for October 20, 2023. Then, the assessment will become a possibility amid intense pre-election climate. Although expectations do not rule out an upgrade of the country before the end of the elections, estimates indicate that the move could come in October.

Last Friday DBRS confirmed the BB high rating. Like all agencies, Canadian DBRS referred to the “election” factor. Indirectly, but not clearly, it connected the positive, until now, course of the Greek economy and the reforms to the stable governments of the last years. The uncertainty of the change in the political scene has not yet been incorporated into the forecasts, where the new correlations show the difficulty of collaborations.

According to DBRS the next parliamentary elections will be held this year, probably in the Spring. With the current electoral system introduced by the SYRIZA/ANEL joint government in 2016 – which is based on simple proportional representation – the formation of a single party government will not be possible. If there is no multi-party cooperation, the most likely scenario is a second election, about a month after the first. In DBRS Morningstar’s view, policy continuity is expected with the RRF providing incentives to continue reforms, however, a prolonged election cycle could lead to some delays in policy implementation. In recent years, Greece has enjoyed a stable political environment and good cooperation with its counterparts and the EU institutions under the governments first of SYRIZA and then of New Democracy.