FITCH for Greek bonds: ECB decisions ensure debt sustainability


The decision of the European Central Bank to continue the Greek bond markets after 2022, ensures the sustainability of the Greek debt, according to the American rating agency Fitch.

Commenting on the ECB’s decision on Greek bonds, the house notes that this move reduces the risk of a sharp rise in borrowing costs for Greece.

He even estimates that the ECB will remain “flexible” in the management of Greek government securities, extending the program of bond purchases (waiver) after June 2022.

According to the house, the ECB confirmed last Thursday that the net purchases of assets under the Pandemic Extra Market Program (PEPP) end in March. But it extended the reinvestment period of bonds maturing by one year, until the end of 2024.

The ECB also noted that, in the face of potential market pressures related to the pandemic, its bond reinvestments purchased through PEPP ‘can be flexibly adjusted over time, types of assets and jurisdictions’, including the Greek bond market. .

PEPP, Fitch notes, has been an important source of funding flexibility for Greece, whose government bonds are not eligible for other ECB programs because they are not rated investment grade by firms. By the end of November, the ECB had bought Greek government securities worth 34.9 billion euros (19.3% of estimated GDP in 2021).

Purchases through PEPP contributed to the maintenance of low interest rates on Greek debt, with the 10-year yield falling to about 1.3% from 2% or more in May 2020.

Other factors also support the sustainability of public debt. Greece’s significant liquidity cushion is projected to be close to 18% of GDP at the end of the year, which covers service costs for the entire 2022.

Fitch estimates that the debt-to-GDP ratio fell from its 2020 high of 206.3% to 197.3% this year.

Reportage: Costas Tsavalos

Source ERT

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