ATHENS – Greece’s credit rating by the Fitch’s agency has been held at B for now and the country given a stable outlook as it tries to recover from a crushing economic crisis.
But the agency warned there could be a downgrade if the government fails to get its candidate elected as symbolic Greek President in February, 2015, which would force early national elections with polls showing the major opposition Coalition of the Radical Left (SYRIZA) in position to win.
SYRIZA is opposed to the austerity terms being imposed by the ruling New Democracy Conservatives of Prime Minister Antonis Samaras and his coalition partner the PASOK Socialists on orders of international lenders.
Among the key conclusions in the Fitch report are that the country’s funding needs for the next six months are fully covered and that talks with the creditors could be extended into next year although Samaras, wanting an early exit from bailout deals, had wanted a swifter result.
Fitch had upgraded Greece to B from B- in May, bringing the country’s rating five notches below investment grade. It now says that the 2014 budget will meet its targets thanks to an unprecedented fiscal adjustment and that fiscal figures are also likely to outperform expectations.
Following the stress tests banks need no further capital, Fitch said, even though they are burdened with as much as 80 billion euros in bad loans, including 250 million owed by New Democracy and PASOK.
The agency said the crisis is ending, with the economy technically now out of recession, but warns of the risk of a SYRIZA government, with the Leftists saying they would revise the conditions of 240 billion euros ($306 billion) in two rescue packages or walk away from the debt, leaving the country broke and unable to borrow from the markets.
The achievement and sustainability of the midterm target for a primary surplus of 4 percent will depend on continued fiscal discipline and on economic growth, Fitch stressed.