Fitch raises Greece's credit rating to CCC after new bailout deal struck

The new rating for Greece remains deep in junk-bond territory, reflecting the tenuousness of the 86 billion euro (S$134 billion) rescue deal.
The new rating for Greece remains deep in junk-bond territory, reflecting the tenuousness of the 86 billion euro (S$134 billion) rescue deal.PHOTO: REUTERS

WASHINGTON (AFP) - Fitch Ratings raised its credit grade for Greece by one notch to CCC on Tuesday (Aug 18), saying the new bailout deal reached with EU institutions lowered the chance of a new default.

The Aug 14 deal setting the framework for a third rescue programme "has reduced the risk of Greece defaulting on its private sector debt obligations", Fitch said.

At CCC, the new rating for Greece remains deep in junk-bond territory, reflecting the tenuousness of the 86 billion euro (S$134 billion) rescue deal and the need for official debt relief to render Athens's finances sustainable over the medium term.

"The risks to the programme's success remain high," Fitch said in a statement.

The rating agency assumed that the deal would be finalised in time for Greece to make a 3.2 billion euro bond repayment on Aug 20.

But it noted that "it will take some time for trust to be restored between Greece and its creditors, which increases the risk of delayed programme reviews". 

It added: "Meanwhile, the political situation in Greece remains unpredictable."

Fitch also noted that the participation of the International Monetary Fund in the new programme, seen as essential by the European Union creditors, is "uncertain" and tied to "significant" debt relief.