The agency went ahead with the upgrade of the new bonds Athens issued on Monday after the restructuring of the Greek debt, following the formal statement that 96 percent of bondholders are taking part in the haircut. It states clearly that the completion of the debt swap remedies the credit event.
Fitch argues that the participation of private creditors in the swap has considerably improved the profile of Greek debt servicing, reducing the risk of a repetition of short-term difficulties in the refinancing of the new Greek bonds.
Despite the important upgrade, the agency is not changing Greece’s “junk” status. It notes that the risk of a default remains significant even after the restructuring, owing to the country’s very high debt level and the serious challenges Greece is facing.
Fitch explains that the burden of servicing the debt will be moderate, with the interest rate estimated to have dropped from 5.5 to 4 percent, while the significant payouts have been postponed until after 2020. It adds that the new support program will not depend on the country’s return to the markets, unlike the first one, which offers the holders of Greek bonds a level of security.
Another positive note on the second bailout package came yesterday from the head of the European Commission, Jose Manuel Barroso. Responding to eurosceptic European deputies, the Portuguese politician said default was not an option and that the aim now is for the second package to be successful, but he added that “Greece is unable to apply the reforms that are necessary for it to become competitive.”
Barroso also said that within April the Commission will issue a statement regarding growth and employment in Greece. Priority will be given to supporting small and medium-sized enterprises, major road projects and programs to provide unemployed young people with skills.