European debt crisis

The positive sentiment in the secondary market coupled with positive developments on the fiscal front have contributed to the following paradoxical occurrence: Greece, which has a much lower credit rating (BB, BB-), borrowing at a lower interest rate than France, which the rating agencies rank at the top of the rating scale (AA-, AA2).

According to Fitch Ratings, the European Central Bank (ECB) and central banks across the European Union are expected to endure "prolonged losses" due to increased borrowing costs. The credit agency projects that the total loss for the Eurosystem will amount to 160 billion euros from 2024 to 2028, before accounting for provisions, reserves, and taxes.

Greece plans to conclude the re-privatization of its banks by early October with the sale of its last stake in National Bank, two sources familiar with the matter told Reuters on Wednesday.

Last year the 27 EU member states averaged 0.4% growth. “The German economy even contracted by 0.3%, […] while France and Italy have so far failed to show any convincing growth momentum,” writes the German National Network of Journalists (RND).

The European Central Bank's cautious monetary policy will be partly responsible for the eurozone's weak economic growth over the next year or two, UK-based research firm Capital Economics maintains.

The firm forecasts growth in the eurozone at 0.7% in 2024, 1.2% in 2025 and 1.1% in 2026.

Credit rating agencies agree that Greece's credit account deficit prevents the country from achieving an even more improved debt rating.

The country spent 14 years with a junk rating on its debt before achieving the highly sought investment-grade rating. But recent data published by the Bank of Greece concerning the first five months of the year raise concerns from analysts.

The Greek economy saw an inflow of 5 billion euros for Greek shares and bonds as a result of the credit rating outlook upgrade of the Greek economy, a report in the Bank of Greece Economic Bulletin said on Wednesday.

Eurozone GDP remained in positive territory in the second quarter, but the expansion was limited.

Specifically, according to preliminary data released by Eurostat, eurozone and EU GDP grew by 0.3% every quarter, as well as in the first quarter of the year, keeping expectations low, as it appears it won’t take much to bring the economy back into recession.

The recovery of the Greek economy and the return to primary surpluses after the Covid-19 pandemic have been the two key factors driving the steady and significant reduction of public debt as a percentage of gross domestic product (GDP). 

Thanks to this progress, Greece regained its investment grade status in 2023 and continues to enjoy upgrades from credit rating agencies.