FRIDAY, 04/08/2023 - Scope Ratings GmbH
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      Scope upgrades Greece's long-term credit ratings to BBB- and changes the Outlook to Stable

      Strengthening of European institutional support, a favourable trajectory of government debt and banking-sector reforms drive rating upgrade. High government debt, policy risks longer run and banking-system fragilities are challenges.

      For the updated report accompanying this review, click here.

      Rating action

      Scope Ratings GmbH (Scope) has today upgraded the Hellenic Republic’s long-term local- and foreign-currency issuer and senior unsecured debt ratings to BBB-, from BB+, and revised associated Outlooks to Stable, from Positive. The Agency has upgraded short-term issuer ratings to S-2 in local- and foreign-currency, with Outlooks revised to Stable, from Positive.

      Rating drivers

      The upgrade of Greece’s long-term sovereign ratings to an investment-grade level of BBB- reflects the pursuant credit-rating drivers:

      1. Sustained European institutional support for Greece, reflecting changes since the Covid-19 crisis to support vulnerable euro-area Member States via monetary- and fiscal-policy interventions. This reflects, since 2020, innovations of ECB asset purchase programmes and relaxation of collateral framework requirements that have ensured eligibility for Greek sovereign bond instruments despite the borrower’s non-investment grade ratings. Central-bank measures, together with the endorsement of the EUR 30.5bn (13.7% of average 2021-26 GDP) Recovery and Resilience Plan for Greece, alongside the possibility of further debt treatment long run from European partners, demonstrate a more lasting European backstop beyond recent crises, supporting debt sustainability and creating fiscal space for the government to raise public investment.
      2. A steady trajectory of decline in public debt, on the back of high inflation, above-potential real economic growth, low average interest costs of the prevailing debt portfolio and achievement of primary fiscal surpluses. Greece’s public debt to GDP ratio is expected to fall to 160.7% by 2023, a 46pp decline from the 2020 peak.
      3. Structural reforms that have meaningfully curtailed high non-performing loan (NPL) ratios and substantively enhanced banking-system stability alongside policies aligned with Recovery and Resilience Facility (RRF) funding and the European Semester mobilising investment and boosting recovery.

      The rating upgrade reflects updated Scope assessments of Greece under the ‘domestic economic risk’, ‘public finance risk’ and ‘financial stability risk’ categories of its sovereign methodology.

      However, Greece’s credit ratings remain challenged by: firstly, high government debt, representing a long-run vulnerability to reappraisals of sovereign risk in financial markets. Scope would consider further substantive reductions of the debt ratio – in line with baseline expectations – as crucial for Greece’s future rating trajectory. Furthermore, gradual weakening of the strong structure of debt, with higher refinancing costs, alongside the gradual transition from public to private ownership of the debt, and shorter average tenors of new debt, reflects a challenge. Secondly, policy risks exist as Greece transitions from dependence on conditional official-sector credit towards less-conditional market-based financing. Thirdly, banking-sector fragilities remain. Finally, structural economic weaknesses such as a modest medium-run growth potential, high unemployment, a weak external sector, and long-run environmental challenges are constraints.

      The Stable Outlook represents Scope’s opinion that risks to the sovereign ratings are balanced over the forthcoming 12-18 months.

      The long-term ratings/Outlooks could be upgraded if, individually or collectively: i) nominal growth and fiscal consolidation maintains a strong and sustained downward public-debt trajectory medium run; ii) banking-sector risks are further reduced, via stronger capitalisation, further reductions in non-performing loans and/or curtailed sovereign-bank linkages; and/or iii) structural economic and external imbalances are curtailed, elevating medium-run growth potential and strengthening macroeconomic sustainability.

      Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) Eurosystem support for Greek debt were curtailed significantly, triggering crystallisation of more severe market scenarios; ii) fiscal policies remain loose for longer or a more severe economic downturn materialises, impeding or reversing a current trajectory of reductions in the government-debt ratio; iii) banking-sector risks re-intensify, raising risk of the crystallisation of contingent liabilities affecting the sovereign balance sheet; and/or iv) the sustainability of macroeconomic growth weakens and/or macroeconomic and external-sector imbalances rise.

      Rating rationale

      The first driver of the upgrade of Greece to an investment-grade rating is sustained European institutional support, which Scope expects to endure beyond recent crises, with monetary and fiscal policy innovations reflecting permanently available policy instruments. This reflects, specifically, monetary-policy measures centring upon innovations of ECB asset purchases and relaxation of collateral-framework requirements – with waivers that have allowed for the eligibility of Greek sovereign bond instruments under facilities. In addition, EU fiscal programmes have advanced, including the Recovery and Resilience Facility allocation for Greece under a programme of EU common debt issuance – representing steps in the direction of greater fiscal integration within the European Union, supporting disproportionately the most-indebted regional borrowers.

      ECB policy innovations since the Covid-19 crisis have been an anchor preserving the sustainability of financing conditions. Prior to the crisis, Greek bonds were ineligible for ECB asset purchases or as collateral, and ECB purchases were additionally restricted in their capacity to address idiosyncratic, country-specific market failures due to purchasing based on the capital key. The central bank introduced in 2020 flexibility of purchases rather than strictly purchasing assets on aggregate bases proportionally to a country’s population and economic size. This innovation of flexible adjustment of purchase parameters – including further adaptation of rules in the provision of specific waivers for credit-rating regulations concerning purchases of Greek instruments absent an investment-grade credit rating – support especially funding conditions of euro-area Member States having the most significant propensity for market stress. Said innovation of enhanced flexibility of central-bank liquidity provision reflected furthermore loosening of collateral-framework credit-rating regulations in 2020, specifically the granting of a waiver introducing temporary eligibility of Greek government debt instruments, which has anchored Greek debt markets and helped the liquidity of the banking system.

      Scope holds the view said innovation of eligibility of Greece for and flexibility of ECB monetary policies is likely to endure. Recent announcements since the Russia-Ukraine crisis have supported stated assumption. Firstly, the ECB has communicated that, during the Pandemic Emergency Purchase Programme (PEPP)’s reinvestment phase, slated presently through at least the end of 2024, Greek debt instruments will stay available for purchase above and beyond the roll-over of redemptions if required. Secondly, extension of the waiver with respect to the collateral eligibility of Greek bonds under the Eurosystem Credit Assessment Framework until at least conclusion of the PEPP reinvestment period anchors markets. Finally, announcement of a novel ‘Transmission Protection Instrument’ absent termination date signals the sought greater permanence of ECB flexibility beyond Covid-19 and can be activated to counter “unwarranted disorderly market dynamics”1 specific to a select Member State. Eligibility of Greece for ECB programmes and an enhanced policy toolkit of the European Central Bank since recent crises ease some bottlenecks affecting ECB lender of last resort functions within monetary union – supporting especially ratings of the most-vulnerable sovereigns.

      So long as Greece stays compliant with Europe’s fiscal and structural-reform regulations, Scope views the Eurosystem as likely to support Greek markets in the future under adverse market scenarios – providing a much-needed financial backstop. The political stability secured after recent parliamentary elections strengthens government capacity for further adoption of necessary reforms. A prudent policy framework on aggregate reinforces Greece’s relationship with Europe, likely anchoring European support for at least the next four years.

      In addition to ECB support, Greece’s credit ratings are helped by EU fiscal policies. The country is achieving main milestones of the Next Generation EU (NGEU) programme, consisting of adoption of structural-reform conditionality and the execution of investment programmes. The NGEU funding for Greece amounts to EUR 30.5bn by 2026 (13.7% of average 2021-26 GDP – one of the highest such ratios of the EU), with a majority of funding (EUR 17.8bn) in grants and the rest being concessional loans. This financing is linked to measures modernising the economy and adapting to climate change. Around a quarter of programmed monies have been disbursed to date and, during May 2023, Greece submitted a request for the third payment of EUR 1.7bn. The NGEU programme shifts a segment of investment from being nationally- to EU-funded and links such investment to reform conditionality – supporting economic potential and debt sustainability.

      European support for Greece furthermore reflects the partnership following the Economic Adjustment programmes of past years alongside post-programme Enhanced Surveillance framework that concluded2 August of last year. Greece has entered “normal” post-bailout surveillance – like Ireland (rated AA-/Positive), Spain (A-/Stable), Cyprus (BBB/Stable) and Portugal (A-/Stable) – until it has repaid 75% of loans received (circa 2059), ensuring a prolonged phase of biannual (although lighter) monitoring of structural-reform and fiscal-consolidation measures from European partners. The EU’s post-bailout surveillance seeks to ensure annual gross financing needs of Greece stay under 20% of GDP up to 2060, with the Eurogroup agreeing to review, at the end of the European Financial Stability Facility (EFSF; AA+/Stable) grace period in 2032, whether additional debt measures might be needed to sustain attainment of this objective. Given the track record of the EFSF in reprofiling Greek debt repayments, Scope expects the Eurogroup to provide additional debt measures if needed to help maintain the country’s gross financing needs at sustainable levels.

      The second driver of the upgrade reflects a steady trajectory of decline in public debt and expected sustained primary budget surpluses. The trajectory of debt reflects expectation of a degree of further convergence of Greece’s elevated debt ratio with that of other highly-indebted euro-area sovereigns.

      Following more than a decade and many initiatives from European and international partners for setting Greece’s general government debt ratio on a sustainable trajectory, the debt ratio had instead reached fresh all-time records of 206.3% of GDP by 2020 amid the pandemic crisis. However, supported by robust economic recovery since Q3 2020 (8.4% growth in 2021, followed by 5.9% last year), elevated inflation (9.3% in 2022 (Harmonised Index of Consumer Prices), compared with a 2012-21 inflation average of -0.1%), still-low average interest costs of the outstanding debt portfolio after public- and private-sector debt restructurings and concessional loan programmes, plus sharp reduction of the budget deficit to 2.3% of GDP last year, from 8% in 2021 and 10.7% in 2020, Greek debt declined a meaningful 35pps (from its 2020 peaks) to about 171% of GDP by year-end 2022.

      Moving ahead, Scope’s baseline debt-sustainability analysis envisions a further decline in this public-debt ratio, although with said decline slowing as nominal economic growth normalises, reaching 160.7% by 2023 and 141.6% by 2028. This baseline scenario assumes near-term growth slowdown to 2.4% for 2023 but followed by continued above-potential output growth of 1.6% in 2024 and 1.3% during 2025-28 (no annual recession is assumed during the forecast horizon). The scenario considers elevated GDP deflator inflation of 4.2% in 2023 before 2.3% on average between 2024-28, contrasting sharply with the -0.4% observed on average during 2012-21. Furthermore, the scenario assumes sustenance of a primary budget surplus from 2023-28 – with headline budget deficits to stay under Maastricht 3% of GDP limits between 2022 and the conclusion of the forecast horizon to 2028. Under such a scenario, debt-to-GDP returns to its lowest levels since the 2012 Private Sector Involvement by 2028 and converges on expectations for the general government debt of investment-grade-rated Italy (BBB+/Stable; 139.2% of GDP by 2028). This rating upgrade reflects Scope’s conclusion that high inflation is a core driver supporting the debt trajectory presently compared with historical challenges in trimming debt. Nevertheless, adverse scenarios prevail, which might slow or reverse the declining path of debt, ranging from: i) a sharp economic downturn; ii) an unexpected return to low inflation; iii) a renewed severe rise in borrowing rates; and/or iv) an unexpected material weakening of the fiscal position. As an example, under one adverse scenario of two years of recession over 2024-25, Greek debt could re-rise to 180% by 2025.

      The third driver of the upgrade is structural-reform policies that have curtailed high non-performing loan ratios and enhanced banking-system stability alongside policies aligned with Recovery and Resilience Facility financing and the European Semester mobilising investment and boosting recovery.

      Reform adoption, in cooperation with European partners, has spanned a range of policy areas, such as managing the socio-economic effect of the pandemic and facilitating implementation of public investment. The Hercules Asset Protection Scheme completed its final securitisations in October 2022, after its launch in December 2019, having facilitated guarantees on loans of nearly EUR 55bn. This scheme has driven a substantive decrease in NPL ratios to 8.2% of total loans on a consolidated basis by March 20233, from the 49.2% at June-2017 peaks (and 40.0% as of end-2019). All four systemic Greek banks achieved objectives of a single-digit NPL ratio by the end of 2022. This considers that the decline in NPLs in 2022 was due, however, mainly to classification of many loans as “held for sale” – pending completion of sale transactions via securitisation.

      Alongside EU NGEU funding, the National Recovery and Resilience Plan, “Greece 2.0”4, seeks mobilisation of an added EUR 26bn in private-sector investment and outlines reforms across: i) the green transition; ii) digital transition; iii) employment, skills and social cohesion; and iv) private investment and economic transformation. Authorities expect Greece 2.0 to raise output by 4.3% by 2026, while, combined with programmed structural reform, output could rise 6.9% by 2026. This is aided by Greece’s strong record in EU fund absorption, having ranked second among the EU-27 in its absorption rate of cohesion funds during the 2014-20 EU multiannual budget phase. By comparison, the European Commission estimates the NGEU effect for Greek growth (not including the growth impact of structural reforms) could, short to medium run, raise baseline annual growth 0.3-0.5pps during 2021-2026.

      Greece’s BBB- ratings are further anchored by a strong profile of debt resulting from the proactive public-debt management of past years, supportive measures of euro-area creditors since the global financial crisis alongside low-interest global conditions prior to 2022. This is reflected in a high share of debt held by the official sector (around 85% of central-government debt), after including Greek bonds temporarily held by the Eurosystem in this figure. As sovereign ratings are assigned on debt due to be paid to the private sector, this high share of debt held on the official-sector balance sheet is credit positive. This debt structure is, furthermore, anchored by a long weighted-average debt maturity of 19.6 years5 – the longest of the agency’s rated sovereign universe – which, together with 100% of debt outstanding on fixed rates (after accounting for interest-rate swap transactions), helps cushion the effects of higher interest rates translating to higher debt-servicing costs. The government successfully raised EUR 3.5bn via a 15-year syndicated bond last month – the first issuance since the elections. Greece has pledged to repay early EUR 5.3bn of Greek Loan Facility debt. Refinancing risks are additionally eased by a cash balance of EUR 30.6bn (14.7% of GDP) as of end-2022.

      Nevertheless, as Greece exits its economic-adjustment programmes and associated concessional loans and debt relief, sought transition to dependence on market financing, especially under current higher interest-rate conditions, will gradually weaken said strong structure of debt. Amid higher long-end rates since last year, the weighted-average maturity of new borrowing declined temporarily to 5.5 years in 2022 and 4.6 years in 20236. As Greece borrows in markets and with the Eurosystem accelerating its quantitative tightening, publicly-held debt will transition back to private hands gradually. Furthermore, higher costs of borrowing in markets (with the 10-year government bond yield currently nearly 4%, off October-2022 peaks of 5.1% but still materially higher than August-2021 lows of 0.5%) has raised the (low) average net interest costs of the debt portfolio – to 1.5% in 2023, from 1.2% at 2021 lows. Scope expects this average interest cost of Greek debt to further rise to 2.0% by 2028 – nevertheless staying well under levels from the early 2010s.

      Greece’s BBB- ratings remain constrained by meaningful credit weaknesses.

      Firstly, Greece’s government debt remains very elevated – second highest of Scope’s publicly-rated sovereign universe of 39 nations, after only that of Japan (A/Negative). Although Greece’s debt profile remains comparatively strong, the high stock of debt nevertheless exposes Greece to market reappraisals of risk associated with the long-run sustainability of sovereign debt, especially under any scenarios of inability of the ECB to effectively support regional debt markets – such as owing to constrained monetary space and/or any future non-observation of Greece of European rules disqualifying central-bank interventions. This vulnerability from a high stock of debt was observed to a degree in 2022 – with Greece’s yield spread to Germany having reached highs of 296bps (before easing significantly to 123bps by the time of writing) – representing a core rating constraint. Furthermore, amid higher refinancing costs, net interest payments are seen rising to a (nevertheless moderate) 6.6% of general-government revenue by 2028, from 4.9% at 2022 lows. Nevertheless, Greece’s debt service to general government revenues rests below that of Italy and Portugal.

      Secondly, policy risks exist as Greece transitions from dependence of the past decade on official-sector credit and associated policy conditionality towards less-conditional market-based financing. The reform programme of the Kyriakos Mitsotakis government following elections represents comparative continuity of the policy architecture. Nevertheless, available fiscal space is being activated such as EUR 9bn on one-off hand-outs to pensioners, pay rises in the public sector, and a rise in the tax-exemption threshold by EUR 1,000 for households with children. The abolition of a bailout-era solidarity tax and pledge to abolish a special tax on interest on Greek treasury bills and bonds are further examples of reversals of crisis-era policy. To date, the degree of policy reversal following Greece’s exit from the Economic Adjustment Programmes and Enhanced Surveillance is moderate and Greece maintains pursuit of debt reduction and primary fiscal surpluses as core objectives, alongside structural reforms under the RRF. Nevertheless, longer run, possibility of additional drift in policy making under reduced multilateral surveillance and less-conditional private financing represents a concern. This is especially the case should there be any change of government following the next elections – altering the policy architecture more fundamentally and potentially affecting contingent European funding support.

      Thirdly, despite declines in NPLs, the banking system remains burdened by the highest NPL ratio of the euro area. NPLs weigh on bank profitability and banks’ abilities to co-sign investment and support recovery. Although banks have taken capital-enhancing actions to cover the cost of non-performing loan securitisations and gradual phasing out of transitional prudential arrangements, system-wide tier 1 capital ratios amounted to 14.5% of risk-weighted assets in Q1 2023, still below the levels of 16.4% pre-crisis (Q4 2019) despite having risen from 2021 lows (13%). This reflects, furthermore, weak asset quality reflecting a high share of lower-quality capital in deferred tax credits (which accounted for 56% of total prudential own funds as of December 2022) and still-high NPL ratios of the non-significant banks (44.8%), which did not hold the possibility to benefit from government guarantee schemes. The high share of deferred tax credits, banks’ increased domestic government bond holdings, the equity stakes held by the State in the banking system (although the government plans further divestment) and State guarantees under the Hercules scheme imply a stronger sovereign-bank nexus – increasing contingent risks for the sovereign under stressed banking-system scenarios.

      Finally, ratings challenges consider Greece’s modest long-run potential real rate of growth of around 1%, which remains restricted by working-age population contraction of 0.5% a year from 2023-28. Environmental challenges could furthermore affect long-run growth if climate-related risks affect Greece’s crucial tourism and agriculture sectors. Furthermore, limitations in economic diversification, rigidities in the labour market, a low investment share in economic product (lowest of the EU), still high final consumption relative to disposable income and elevated private-sector arrears are challenges. As of Q1 2023, the Greek economy remained 23% smaller than it was prior to the 2008-09 global financial crisis and GDP per capita is 57% of the EU average – reflecting consequences of crises experienced during the past 15 years. Likewise, unemployment remains comparatively elevated at 11.1% in June, although levels have eased off June 2020 peaks of 20.2%. Tax compliance and elevated spending on pensions and public-sector wages (above euro-area averages)7 are further credit-rating constraints, although substantive efforts have been made in the enhancement of tax collections. In addition, Greece’s ratings are constrained by a comparatively weak external sector, including structural current-account deficits, which stood at 7.9% of GDP in the year to May 2023, below the 9.7% of 2022 but considerably higher than the 1.5% of 2019. Looking ahead, the IMF sees the current-account deficit moderating gradually to 3.0% of GDP by 2028. Due to external deficits, Greece’s net international investment position stood at -141% of GDP in Q1 2023 (although improving from -182% at Q2-2021 lows), even though associated risks are mitigated by a high share of euro-denominated liabilities owed to official-sector creditors.

      Core Variable Scorecard (CVS) and Qualitative Scorecard (QS)

      Scope’s Core Variable Scorecard (CVS), which is based on the relative rankings of key sovereign credit fundamentals, provides a first indicative rating of ‘bb+’ for the Hellenic Republic. Greece receives a one-notch uplift to this indicative rating via the reserve-currency adjustment for its euro-area membership under the sovereign methodology. As such, under the methodology, ‘bbb-’ final indicative ratings can thereafter be adjusted by the Qualitative Scorecard (QS) by up to three notches, depending on the size of relative credit strengths or weaknesses versus ‘bbb-’ indicative sovereign peers based on analysts’ qualitative analysis.

      For Greece, the following relative credit strengths are identified via the QS: i) fiscal policy framework; ii) debt profile and market access; iii) external debt structure; iv) banking sector oversight; and v) governance factors. Meanwhile, relative credit weaknesses signalled by the QS are for: i) growth potential of the economy; ii) macro-economic stability & sustainability; iii) banking sector performance; iv) environmental factors; and v) social factors.

      The combined relative credit strengths and weaknesses in the QS generate no net adjustment. As such, after aggregate adjustments, a sovereign credit rating of BBB- is signalled for Greece.

      A rating committee has discussed and confirmed these results.

      Factoring of Environment, Social and Governance (ESG)

      Scope explicitly factors in ESG sustainability issues during its ratings process via the sovereign methodology’s stand-alone ESG sovereign risk pillar, with a significant 25% weighting under its quantitative model (CVS).

      With respect to environmental risk – Greece scores moderately on the CVS on its carbon emissions per unit of GDP but, like other advanced economies, comparatively weakly on carbon emissions per capita. Greece scores the second weakest of the euro area on its exposure and vulnerability to natural-disaster risk (only after Italy) – the latter as measured by the World Risk Index. Greece’s marks are, moreover, moderate on the CVS on the ecological footprint of its consumption compared with available biocapacity. Overall, on the CVS quantitative model, Greece performs slightly above a global median on the environmental ESG sub-category of the CVS model but nevertheless third worst of the EU after Italy and Spain. Droughts and wildfires are becoming more frequent and intense – blazes have destroyed homes and forced tourism-sector evacuations this summer. A separate Ministry of Climate Crisis and Civil Protection was designed following the wildfires of 2021, but adaptation has been hampered by required preparations at the regional administrations. Greece experiences the most significant climate-related economic losses of any EU nation, according to Eurostat8. While burden-sharing via EU support eases associated environmental costs for Greece, natural disasters nevertheless hold not only direct economic and fiscal costs but also indirect consequences such as for Greece’s important tourism industry. Greece holds an ambitious climate policy vis-à-vis its National Energy and Climate Plan9, aiming for 42% reductions from 1990 greenhouse gas emissions levels by 2030 before a zero-carbon society by 2050, alongside penetration of renewable energy sources for 60% of electricity production inside a decade. Greece has had to delay its inaugural issuance of a green bond. Greece’s environmental objectives and moves towards more sustainable economic growth are considered within Scope’s QS via an assessment of ‘weak’ on ‘environmental factors’ as compared with its sovereign peer group.

      Socially-related credit factors are similarly captured under Scope’s CVS quantitative model and QS qualitative overlay. In the CVS model, Greece receives strong scores on income inequality (as captured by the income share of the bottom 50% of the population), moderate marks on labour-force participation, and weak scores on the old-age dependency ratio. Economic weaknesses have historically reflected the effect of net emigration on declines in the working-age population. In addition, high structural unemployment is a credit-rating constraint, although unemployment is seen moderating to 11.1% in 2023 and 10.6% by 2024, from the 14.8% in 2021. The GDP per capita of Greece is low by euro-area standards but substantively higher than that of sovereigns in Greece’s ‘bbb-’ sovereign peer group. In addition, low disposable income of households compared with final consumption is a social consideration, while comparative prevalence of low-income jobs and of small and medium-sized enterprises weigh on the tax base while raising poverty and social exclusion among vulnerable groups. Greece performs moderately on skills of its workforce but strongly with respect to healthy life expectancy, according to the World Economic Forum’s 2019 Global Competitiveness Report10. In the QS assessment of Greece’s ‘social factors’, Scope evaluates this qualitative analytical category as ‘weak’ compared with the credit’s sovereign peers.

      Under governance-related factors in the CVS, Greece presents moderate scores on the World Bank’s Worldwide Governance Indicators (WGIs). Despite lagging peers in the euro area on governance, the reform agenda since 2017 has resulted in some improvement on the WGIs. Ongoing reform has supported an improvement in institutional strengths and has brought progress in areas such as tax administration and compliance, the judicial system, public administration, and anti-corruption. Since 2019 elections, Greece has experienced a phase of comparative political stability, supported by an absolute parliamentary majority held since by the New Democracy government. In the second round of 2023’s elections, incumbent New Democracy won nearly 41% of the vote and 158 seats (of 300) in the Hellenic Parliament, maintaining its absolute majority. In the QS assessment of Greece’s ‘governance factors’, Scope evaluates this qualitative analytical category as ‘strong’ against Greece’s ‘bbb-’ sovereign peer group.

      Rating Committee
      The main points discussed by the rating committee were: i) institutional support; ii) debt and budgetary outlook; iii) structural reform and EU funds; iv) debt structure; v) non-performing loans and financial stability; vi) current account and structural economic weaknesses; vii) policy and political outlook; and viii) sovereign peers considerations.

      Rating driver references
      1. European Central Bank – The Transmission Protection Instrument
      2. European Commission – Financial assistance to Greece
      3. Bank of Greece, Evolution of loans and non-performing loans
      4. Hellenic Republic, “Next Generation EU”: Greece 2.0, National Recovery and Resilience Plan, May 2021
      5. Public Debt Management Agency (Greece) – Portfolio Risk Parameters
      6. Public Debt Management Agency (Greece) – Weighted Average Cost/Maturity of Gross New Annual Borrowing
      7. IMF, 2022 Article IV Consultation–Press Release; Staff Report; And Statement by the Executive Director for Greece, June 2022
      8. Eurostat – Losses from climate change: €145 billion in a decade
      9. Hellenic Republic Ministry of the Environment and Energy, National Energy and Climate Plan, December 2019
      10. World Economic Forum: The Global Competitiveness Report 2019

      The methodology used for these Credit Ratings and Outlooks, (Sovereign Rating Methodology, 27 September 2022), is available on
      Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on
      The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

      Solicitation, key sources and quality of information
      The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
      The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
      Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
      Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

      Regulatory disclosures
      These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
      Lead analyst: Dennis Shen, Senior Director
      Person responsible for approval of the Credit Ratings: Giacomo Barisone, Managing Director
      The Credit Ratings/Outlooks were first released by Scope in January 2003. The Credit Ratings/Outlooks were last updated on 2 December 2022.

      Potential conflicts
      See under Governance & Policies/Regulatory for a list of potential conflicts of interest related to the issuance of Credit Ratings.

      Conditions of use / exclusion of liability
      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. 

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