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Fitch Affirms Greek Rating at 'B,' Outlook Stable

fitchFitch Ratings affirmed Greece’s long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘B’ and its outlook as stable. The rating in May was ‘B-‘.
However, the rating will drop if the country goes to premature elections without clear results or negotiations with the Troika of international creditors will not reach an agreement.
According to Fitch, the Greek state budget is on track to meet its 2014 objective and that the country’s funding needs for the next six months are fully covered. Also, the report said that negotiations with the international lenders could be extended into 2015.
Fitch noted that Greece managed a “remarkable budgetary adjustment” and forecasted GDP growth from 0.5% in 2014 to 2.5% in 2015. The primary surplus measure used under the Troika program is forecast by Fitch at 1.5% of GDP this year. Also, following October’s stress tests, Greek banks need no further capital.
Greece is running a current account surplus of 1% of GDP as a result of reduced imports, a rise in tourism revenue and a significant step-up in net EU transfers.
The most painful phase of Greece’s adjustment is over, but the country needs to maintain fiscal discipline and a sustained recovery in growth in order to reach the 4% primary surplus target.
Fitch warned of the risk that the next government to emerge from snap elections may not be as committed to economic and fiscal reforms. Potential political upheaval in Greece in conjunction with a weakening growth outlook in the Eurozone countries represent downside risks to these forecasts.

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