Moody’s not sure Greece can fund it­self after bailout

Financial Mirror (Cyprus) - - FRONT PAGE -

Moody’s rat­ing agency has said it is doubt­ful that Greece can fi­nance it­self with­out any as­sis­tance after its Troika bailout ends later this year.

“We know that the dis­cus­sion about the day after the bailout in Greece is po­lit­i­cally loaded,” Moody’s se­nior Vice Pres­i­dent Marie Diron said in an in­ter­view with fi­nan­cial Imerisia on Satur­day.

“We are not sure that the econ­omy’s cred­i­bil­ity has been re­stored enough so that the coun­try can stand on its own feet,” she added.

Moody’s up­graded Greece’s sov­er­eign rat­ing to Caa1 in Au­gust and is due to re­view its rat­ing at the end of Novem­ber. Greece has made a turn­around by get­ting its fi­nances back on track and end­ing a four-year ex­ile from debt mar­kets in April. But the coun­try should stick to re­forms, and growth needs to pick up so that its debt load be­comes sus­tain­able, Diron added.

Fol­low­ing an un­pop­u­lar 240 bln euro bailout that led to tough aus­ter­ity mea­sures and ris­ing un­em­ploy­ment, Athens con­tin­ues to rely on EU/IMF loans. But un­der pres­sure ahead of a pres­i­den­tial vote in Fe­bru­ary that could trig­ger snap polls, the gov­ern­ment has staked its sur­vival on ex­it­ing the bailout ahead of plan at the end of this year.

Na­tional debt is seen reach­ing 175% of GDP this year and the gov­ern­ment has lob­bied to se­cure lower in­ter­est rates and longer ma­tu­ri­ties from cred­i­tors, even though yields on bonds have been ris­ing in­stead of drop­ping.

The coun­try emerged from a crip­pling six-year re­ces­sion at the start of the year and has been grow­ing ever since, sea­son­ally ad­justed data on Fri­day showed.

Fig­ures showed three con­sec­u­tive quarters of growth, even though Greece had only been ex­pected to exit what the gov­ern­ment has called the “Great De­pres­sion” in the third quar­ter. Ear­lier quarters were re­vised us­ing new EU for­mu­las. The news is a boost for the frag­ile coali­tion gov­ern­ment, which has been promis­ing aus­ter­ity-weary Greeks bet­ter times ahead. An­a­lysts said it meant the coun­try will prob­a­bly top its 2014 0.6% growth tar­get and im­prove its swollen debt ra­tios.

“The fig­ures will cer­tainly help to beat the fis­cal and debt tar­gets for this year, although they don’t sig­nif­i­cantly change the pic­ture for long term debt sus­tain­abil­ity,” said Diego Is­caro of IHS Global In­sight.

Eurobank economist Pla­ton Monokrous­sos said the lat­est data com­bined with the re­vi­sions would lower Greece’s debt to GDP ra­tio - ex­pected to hit 175% of GDP this year - but only by one per­cent­age point.

Data pub­lished on a sea­son­ally ad­justed ba­sis for the first time since 2011 showed the 182-bln euro econ­omy ex­panded by 0.8% in the first quar­ter - the first time since the sec­ond quar­ter of 2009.

It then grew 0.3% in the sec­ond quar­ter and 0.7% in the third on the back of a strong tourist sea­son, faster than eu­ro­zone driv­ers Ger­many and France.

But econ­o­mists es­ti­mate that even if the econ­omy con­tin­ues to grow as fore­cast over the next two years, it would only re­turn to about 80% of its pre-cri­sis size in 2007 when it sank into re­ces­sion amid a global credit crunch and a heady bout of over­spend­ing and bor­row­ing. Since then, the econ­omy has con­tracted for 24 out of the 26 quarters un­til the end of last year.

A debt cri­sis and aus­ter­ity im­posed by EU/IMF lenders deep­ened the re­ces­sion, wip­ing out a quar­ter of the econ­omy, cut­ting house­hold in­come by 30%, leav­ing over one in four Greeks un­em­ployed and trig­ger­ing vi­o­lent protests, an­a­lysts have said.

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