Washington: Rating firm Fitch lowered Greece’s credit outlook to negative from stable, citing rising political uncertainty, but kept the country’s credit rating unchanged at ‘B’, indicating highly speculative.
“The current period of political uncertainty has increased the risks to Greece’s creditworthiness as official financing, and any potential reopening of market access, could be delayed for some months,” Fitch said in a statement.
“Early elections to be held on January 25, have made the direction of Greek policymaking more uncertain.”
Greece had been expected to exit recession after six years of economic distress, with the help of two international financial rescues.
But the government called the January 25 snap general election amid political gridlock, raising concerns that a victory by the leftist Syriza party will force Greece to renegotiate its bailout with the so-called “troika”: the European Commission, the European Central bank and the International Monetary Fund.
“Prolonged political deadlock until the summer is not Fitch’s expectation, but would increase the risk of financing difficulties and a return to recession,” the agency said.
Fitch acknowledged that opinion polls show that a Syriza victory in the election was the most likely outcome, but pointed to “strong incentives” for a new Greek government and the troika to reach an agreement.
“Nevertheless, there is a wide gap between the policy proposals of both sides, such that negotiations would be complicated and subject to risks,” it said.
The company noted that Syriza had moderated its policy stance since 2012, and advocates keeping Greece in the eurozone and honouring the embattled country’s obligations to the IMF and private creditors.
“However, the privatisation programme would most likely stall under a Syriza-led government and there would be upward pressure on the public sector wage bill,” it said.
Fitch said it had maintained Greece’s ‘B’ credit rating in part because the government’s budget is on track to meet its 2014 objective, “underscoring a remarkable budgetary adjustment in recent years in the face of severe cyclical headwinds.”
Fitch forecast gross domestic product growth of 0.5 percent for Greece in 2014, accelerating to 1.5 percent in 2015, a tenth point lower than its November forecast, citing domestic political uncertainty and a weaker growth outlook in the eurozone.
The ‘B’ rating reflects weak “standalone” creditworthiness, as Greek banks are well-capitalised but their asset quality is weak, the company said.AFP
ATHENS: Greece’s central bank has moved to protect its banks from any fallout from the coming general election, asking the European Central Bank to approve a stand-by domestic emergency funding line, a Bank of Greece official said yesterday.
The move comes after two major banks applied to be able to tap an emergency liquidity assistance (ELA) window on Friday as Greeks withdraw cash before the snap election on January 25.
“We have sent a request to the ECB on ELA approval for all four major banks to have a shield for the banking system,” the official said, declining to be named.
“It is up to each bank to decide whether it will use the funding line,” the official added without providing further details.
Under ELA, national central banks can lend to commercial banks but have to get approval from the ECB to do so. Greek banks relied on it heavily at the peak of the debt crisis in 2012 but had repaid it by early last year.
On Friday, executives at Eurobank and Alpha Bank said their banks’ requests for an ELA funding line were precautionary and partly related to their exposure to Swiss franc mortgages.
National Bank, the country’s biggest lender by assets, has no plans to tap ELA as it has sufficient collateral to draw cheaper funding from the ECB if needed, its spokesman said.
Second-largest lender Piraeus Bank does not expect it will need to do so either, a senior executive at the bank said. “We are not planning to use ELA funding,” the senior executive said.Reuters
