* Moody's raises rating, citing stabilising economy, falling
* Third major agency to raise its rating
* Rating still junk to reflect risky politics, friction with
By Harry Papachristou
ATHENS, Nov 30 Rating agency Moody's raised
Greece's sovereign rating to 'Caa3' from 'C' on Friday, saying
it expected the debt-laden nation to meet its 2014 budget
targets and that its recession will end next year.
Moody's is the third and last major agency to raise Greece's
rating over the past 12 months, after the election victory of a
government backing the country's EU/IMF bailout, which rescued
Athens from default and averted its possible exit from the euro.
S&P raised Greece's rating in December 2012 to 'B-' from
"selective default." Fitch raised it in May 2013 to 'B-' from
Greece, however, is still rated "junk," reflecting its high
debt level, currently at about 175 percent of the country's
gross domestic product.
But Moody's said late on Friday it believed Athens would
meet its 2014 budget surplus target, which would make it
eligible for debt relief from its international lenders.
"Moody's believes that the government remains committed to
achieving a primary surplus of close to 1.5 percent of GDP in
2014, especially as this will be required to qualify for
continuing debt reduction from official creditors," it said in a
Achieving a primary surplus, before interest payments, is a
condition that Athens must fulfill to obtain debt relief
promised to it by its lenders under the terms of a November 2012
The European Union and the International Monetary Fund have
so far extended about 216 billion euros ($294 billion) of
bailout loans to Greece over the past three years. Including the
amount of Greek bonds purchased by the European Central Bank,
the three institutions are currently holding about 80 percent of
On top of its bailout money, Athens has already obtained
debt relief worth about 170 billion euros by imposing losses on
private bondholders and getting interest rate reductions and
loan maturity extensions on its rescue loans.
Following that debt relief, Greece's annual interest
payments fell to around 4 percent of its GDP, "consistent with
other countries in the euro area," Moody's said. Greece's
debt-maturity profile has also been lengthened to around 17
years in 2013, from around 6.5 years in 2011, the agency added.
But it will require years of surplus budgets, robust
economic growth and further debt relief from lenders to make
Greek debt sustainable, with creditors expecting it to fall to
124 percent of GDP in 2020 and well below 110 percent in 2022.
"Greece's substantial debt stock... continues to weigh on
its solvency," Moody's said, adding that its "overall reduction
will be gradual and will remain susceptible to nominal growth
shocks and policy implementation risks."
Moody's also said on Friday it believed that the Greek
economy was bottoming out after six years of austerity-fuelled
The agency expects Greece's economy, which has contracted by
about a quarter in 2008-2013 under the strains of
creditor-imposed austerity, to shrink by a further 0.5 percent
in 2014 but expand by 1.0 percent in 2015.
"The combination of cyclical factors and the implementation
of structural reforms are leading to a gradual improvement in
medium-term growth prospects," Moody's said, adding that the
outlook on Greece's 'Caa3' rating was "stable."
The rating, however, remained at low levels to reflect the
country's virulent politics, its challenging debt negotiations
with lenders and the subsequent risks to Greece's "few
remaining" private-sector creditors, Moody's said.
Earlier on Friday, EU/IMF inspectors postponed a planned
visit to the country, a move that marks a new low in relations
between the parties and could delay aid payments to Athens.
Private investors hold just about 30 billion euros of Greek
bonds. U.S. investment firm Japonica Partners, one of the
biggest Greek bond investors, put out an ad in newspapers
earlier this week, arguing that Athens deserved an 'A+' rating.