Having emerged from previous bailout programmes in 2018, Greece had been hoping to regain such ratings - rubber-stamping its return to fiscal normality - by early 2023, ahead of a national election that could stir political uncertainty.
"The Greek economy has shown resilience during recent crises, supported also by the EU institutions," said Spyridoula Tzima, Vice President of ratings agency DBRS Morningstar. Four of the five major international rating agencies now rate Greece one notch below investment grade. The Moody's rating is still three notches away.
"A demonstration that Greece is likely to maintain prudent primary surpluses after its enhanced surveillance programme and following 2023 elections would be important for consideration of investment grade," said Dennis Shen, Scope Ratings Director.The next election will be held under a proportional representation system, meaning it may not produce an outright winner and could lead to a second ballot, prolonging Athens' wait for a ratings lift.
The new government will also not have a grace period. It will need to demonstrate that it is serious about fiscal consolidation and reforms, they said. "We expect the budget deficit to decline further this year, placing government debt as a share of GDP on a discernible declining trajectory. This could put upside pressure on the ratings," Marko Mršnik, Senior Director and Analytical Manager at S&P Global Ratings, told Reuters.