The upgrade comes just as the economic predicament in Europe appears to be worsening once again, but Greece is actually doing a lot better than it was: Athens has managed to cut the country’s debt by a third in a radical financial restructuring. In fact, the reworking is the biggest sovereign debt restructuring in financial history.
The rest of Europe should be able to breathe a temporary sigh of relief since the threat of a sovereign default is not looming as large any more.The situation is still pretty severe however. S&P’s kept Greece in the ‘junk’ rating of CCC, which is defined as ‘currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.’ Other problems the country faces financially are indirect threats from unpredictable elections on 6 May, and national outcry against austerity measures.
In terms of figures, Greece’s debt remains around the 160% of GDP mark, with more than €240bn borrowed from the eurozone and IMF over the last two years alone. By comparison, the UK’s debt is around 63% of GDP. The situation for Greece sounds extreme, especially given that the UK’s is nowhere near as bad and we’re still austerity crazy at the moment. But there is a silver lining: S&P’s assigned a ‘stable outlook’ to the new CCC rating, meaning that it does not expect to change the rating any time soon.
Realists will look at the situation with a raised eyebrow: MT reported last week that Spain has the highest unemployment it’s ever had, is back in recession, and the UK has just joined it in the double-dip. If a political shakeup emerges with the election of a socialist president in France in the coming weeks, then strategies for steering our way out of the eurozone crisis might become much harder to agree upon. If that happens then Greece’s debt upgrade will only have been the eye of the storm…