March 21 (Bloomberg) -- Greece’s credit rating was maintained at six steps below investment grade by Standard & Poor’s, which said the country’s debt remains large even as its government’s fiscal performance improves.
The country’s long-term local currency debt was kept at B-, with a stable outlook, S&P said in a statement.
“Steps the Greek government has taken to strengthen the institutional framework and improve policy effectiveness have enhanced external and fiscal performance,” the New York-based rating company said. “Greece’s external vulnerabilities persist given its high level of external debt, deflating economy, and limited monetary flexibility.”
The so-called troika of the European Commission, European Central Bank and International Monetary Fund this week concluded a six-month review mission to Greece, saying that the country is on track to meet fiscal targets. Alternate Finance Minister Christos Staikouras told reporters on March 18 that the government had achieved a 2013 budget surplus before interest payments of 2.9 billion euros ($4 billion), more than its prior forecast for a surplus of 812 million euros.
The country’s economy will grow this year for the first time in seven years, the Commission predicts. Greece sparked Europe’s debt crisis four years ago when it revealed its budget deficit had spiraled to more than five times the euro area’s permitted limit, after which it received two rescue packages worth a combined 240 billion euros and carried out the biggest sovereign debt restructuring in history in 2012.
S&P, which raised Greece to B- from Selective Default on Dec. 18, 2012, said the economy has started to rebalance.
The euro was at $1.3786 as of 6:01 a.m. in London, from $1.3779 yesterday in New York.
Yields on government bonds have fallen in almost half the instances when a rating action by Moody’s Investors Service and S&P suggested they should climb, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s. When S&P downgraded the U.S. government in August 2011, bonds rose and pushed Treasury yields to record lows.
Moody’s rates Greece Caa3, which is nine levels below the junk threshold, and Fitch Ratings rates it B-, six steps below investment grade.
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