Greece is making its way up in the world. Yesterday (July 20), it repaid overdue debts with the IMF, ending an ignominious period in which it spent a few weeks in the company of Somalia, Sudan, and Zimbabwe as one of the only countries in arrears with the fund.
Now, Standard & Poor’s has upgraded Greece’s credit rating by two notches. The hike to CCC+ from CCC- still leaves Greek government debt firmly in “junk” territory, but at least the ratings are moving in the right direction. (The country lost its investment-grade rating in 2010.)
In S&P’s sovereign rankings, the upgrade vaults Greece above Argentina, Puerto Rico, and Venezuela. Just above are a clutch of countries that includes Belarus, Pakistan, and the Democratic Republic of the Congo—not exactly bond-market darlings.
The emergency loan that creditors recently gave to Greece to clear its debts with the IMF, and the promise of a new, multiyear bailout in the coming weeks, was enough to convince S&P that a bond default is “no longer inevitable in the next six to 12 months,” the ratings firm said in its announcement. It now reckons that the odds of Greece leaving the euro zone have fallen to below 50%.
But S&P also warns that Greece’s economy is set to shrink by 3% this year, which comes on top of a 25% decline over the past several years. What’s more, the bulk of Greece’s debts are now in the form of loans from fellow euro zone members and IMF, so there are few privately held bonds left for Athens to default on. And nobody expects Greece to tap the bond markets any time soon, making its credit rating of mostly academic interest.
Still, these days Greece will take any good news it can get. Opa!