REUTERS
Fitch Ratings has upgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'CC,' while the issue ratings on Greece's senior unsecured foreign and local currency bonds have also been upgraded to 'CCC' from 'CC,' according to a Fitch press release of August 18.
The Short-term foreign currency IDR has been affirmed at 'C.' The Country Ceiling has been raised by one notch to 'B-' from 'CCC,' according to Fitch Ratings.
The August 14 agreement reached between Greece and the European Institutions on the framework for a third official bailout program has reduced the risk of Greece defaulting on its private sector debt obligations. An initial disbursement of about EUR 23 billion is expected this week and will ease the acute liquidity strain of recent months, covering the repayment of EUR 3.2 billion of bonds held by the Eurosystem maturing on August 20 as well as a European Financial Stabilization Mechanism bridging loan maturing in September.
The program is intended to facilitate an eventual return to market funding. However, the risks to the program's success remain high. It will take some time for trust to be restored between Greece and its creditors, which increases the risk of delayed program reviews. Meanwhile, the political situation in Greece remains unpredictable.
Fitch assumes that any debt relief given to Greece under the ESM program will apply to official-sector debt only, and would not therefore constitute an event of default under the agency's criteria.