* Moody's upgrades Greece by two notches
* Cites improved economic outlook, fiscal position
* Rating still in junk territory
By Karolina Tagaris
ATHENS, Aug 1 Moody's raised Greece's sovereign
credit rating on Friday and gave it a stable outlook, saying it
believed the government's fiscal position had improved
The positive comments boost expectations that Greece's
government may tap bond markets again this year after two sales
in April and July following a four-year exclusion since it was
bailed out by the European Union and the International Monetary
"The first factor behind the upgrade of Greece's rating is
Moody's strengthened expectation that the general government
debt to GDP ratio will start declining in 2015," Moody's said.
"The government's progress in fiscal consolidation under its
economic adjustment program underscores the improvement in the
debt trajectory," it said in a statement raising its rating by
two notches from 'Caa3' to 'Caa1'.
Fitch assigns Greece a B credit rating, while S&P rates it
B-/B. All three credit ratings are still in junk territory,
reflecting a high debt level of about 175 percent of the
country's gross domestic product.
Moody's expects Greece's debt to GDP ratio to decline in
2015 after peaking this year at around 179 percent of GDP. The
ratings agency said Greece's short-term debt rating is
unaffected and remains "Not Prime."
Greece, which has been bailed out twice by the EU and the
IMF with nearly 240 billion euros ($320 million) in rescue
loans, is expected to begin negotiating further debt relief in
In September, it will undergo the latest checkup by
inspectors from its foreign lenders on whether it is meeting the
commitments attached to its bailout before further aid is
Moody's said Greece's structural reform drive had "mixed
results" to date, but praised the government's efforts on labor
market reforms and in liberalizing some areas of the product
"These reforms have led to wage and price adjustments, which
far outstrip adjustments elsewhere in the euro area periphery,"
Greece has enjoyed a turnaround in investor sentiment in
recent months as it begins to emerge from a protracted
After nearly crashing out of the euro zone in 2012, the
country expects to return to economic growth this year following
a six-year depression that has shrunk its economy by a quarter.
In April, it raised 3 billion euros after attracting offers
of about 20 billion euros. That was followed by a second sale in
July, when it raised 1.5 billion euros with the sale of a
three-year bond, though less than the 2.5 billion to 3 billion
Still, Moody's warned that a "continuing, high level of
political uncertainty" in the country constrained its rating at
the Caa level and did not rule out early elections in the first
quarter of 2015.
"The prospect of early elections, the result of which are
highly uncertain, increases the risk of delays in policy
implementation at a critical juncture of the economic adjustment
program," Moody's said.
(1 Euro = $1.3429)
(Editing by Jonathan Oatis)