Moody’s: “Eurogroup decision is a credit positive development”

The Eurogroup decision to unlock additional aid to Greece was heralded as a “credit positive” development by ratings agency…

The Eurogroup decision to unlock additional aid to Greece was heralded as a “credit positive” development by ratings agency Moody’s.

In its statement the rating agency commented that “the Eurogroup also provided a road map on debt relief, which is credit positive as it signals a growing consensus among euro area member countries and the institutions, namely the IMF and the European Commission, on debt relief”.

The rating agency however warned that there are high “implementation risks” due to the small governing majority, weak institutions, and the underlying political and social discontent in Greece.

The full statement of the Vice President at Moody’s Investors Service Alpona Banerji on the Eurogroup decision is as follows:

«The Eurogroup’s decision to approve the disbursement of €10.3 billion to Greece is a credit positive development. The deal alleviates the risk of a liquidity squeeze, especially in the near-term, as Greece’s amortisation and interest payments from May to December this year total €7.5 billion.

The Eurogroup also provided a road map on debt relief, which is credit positive as it signals a growing consensus among euro area member countries and the institutions, namely the IMF and the European Commission, on debt relief.

Although the announcement doesn’t provide specifics on the type of relief, it is clear that material relief will be considered only after the program expires in 2018 and remains contingent on the Greek governments’ ability to implement successfully the conditions associated with the program. We consider implementation risks in Greece to remain high, given the small governing majority, weak institutions, and the backdrop of political and social discontent«.

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