A journey that began two years ago with expectations that Greece would regain its investment grade rating from all rating agencies without exception seems to be coming to an end. On September 13, Moody’s is scheduled to announce a new rating for Greece. And then, by all indications, it will cease to be the last major foreign house that has not upgraded our country to investment grade. Despite the general malaise internationally and Europe in renewed turmoil after the European elections, Greece is perhaps the only country that can reasonably expect an upgrade from the agencies in the grey 2024 – when France and other countries are threatened with downgrades.

To achieve this, the odds are boosted by three key achievements:

– The country’s growth prospects, which again this year are expected to be almost triple that of the eurozone (with GDP growth of 2.2% versus 0.8%) according to the European Commission.

– Rapidly declining public debt not only as a percentage of GDP (due to growth or even high inflation), but also in absolute terms: from €356.8 billion in 2022 and €356.7 billion in 2023 to €356 billion this year as of March 31, with the prospect of falling below €350 billion. 350 billion euros by the end of the year due to the one-off early repayment of €8 billion expected to be officially announced in September for the First Memorandum loans, but also by an additional €2 billion from the reduction in Greek government treasury bill debt.

– The complete achievement of the 2023 fiscal targets with a colossal primary surplus of €4.1 billion, which exceeded all expectations by €1.3 billion, and with the seal of approval from Eurostat.

It’s no coincidence that in the past month, the strict ratings agency Moody’s, which still penalizes the country for the “Greek drama” of the 2010s, upgraded all systemic Greek banks by one or even two notches! It seems unnatural that while Moody’s ranks the banks of a country in the investment grade (Eurobank and Alpha Bank), it continues to refuse to grant the same rating to the country itself.

A critical factor in the September Report, beyond economic data, is expected to be the agency’s assessment of political stability in the country following the results of the European elections. Any hints of destabilization or doubts about the government’s ability to promote necessary changes and reforms could overshadow the country’s investment and growth prospects.

Gains for all

A possible positive outcome, however, would bring new benefits for both the stock market and the Greek economy in general, paving the way for new investments, access to additional foreign capital, improved business competitiveness, and higher employee wages.

Compared to two years ago, when the first expectations for Greece’s upgrade rally to investment grade were born (which began in the summer of 2023 with Scope and DBRS and is set to conclude in two months with Moody’s), the General Index of the Athens Stock Exchange increased from 800 points in July 2022 to 1,450 today (an 80% rise). Simultaneously, the capitalization of listed companies rose from €60 billion to €100 billion, with 50% higher trading volumes on the Stock Exchange (from €88 billion to €138 billion daily).

With greater values and transaction volumes, the Stock Exchange and the economy seem to be building foundations for even greater growth, especially when the vast client base of the American rating agency “discovers” that Greece is now an attractive and safe destination for their capital.

Awaiting Greece’s upgrade to investment grade by Moody’s, the first government bond issuance of the year broke all records (offers of €35 billion). The bonds of Greek banks attracted offers equivalent to 2% of GDP, while the sale of 27% of Piraeus Bank drew over €10 billion. The next similar crash test is expected this fall with the upcoming sale of a stake in the National Bank of Greece by the government.

However, even if Moody’s makes the leap and grants investment grade to the country, it does not mean it will return to where it was “before the disaster.” Nonetheless, it frees the government’s hands to make quicker positive moves and surprises for citizens, similar to the unfreezing of the three-year increments for employees. The goal is a larger increase in the average salary – beyond the €1,500 target set for 2027 (from €1,251 in 2023).