A “mammoth” primary surplus of 4.1 billion euros was recorded – and with Eurostat’s “stamp” – by Greece in 2023, which is 150 times more than last year (just 27 million euros in 2022).
With a surprise surplus of 1.5 billion euros over the country’s target-commitment (it was set at 1.1% of GDP or 2.5 billion euros), Greece signals that it has returned to fiscal order.
However, none of this will be used for benefits, but will be used for a faster repayment of the public debt, which the rating agencies consider to be necessary to give a new upgrade to the Greek economy.
Amidst wars, a wave of precision, record interest rates, international uncertainty and with a Europe on the verge of economic cachexia (if not recession), country upgrades by rating agencies tend to be an unknown word on the Old Continent, at least this year.
However, again the “positive” surprise came from Greece. And it was double! The first hearing of a new upgrade from a foreign rating agency for 2024 was from Standard & Poor’s for Greece on Friday at midnight.
The even more “good news” came on Monday at noon, with the final figures for a surprise surplus of 2023, which may also prove to be a “secret weapon” for new upgrades in 2024.
Under adverse conditions, Athens continues to send a message of certainty and security to the markets. In fact, the government does not forget that first the markets brought Greece back to interest rates and “status” of investment grade, and then the Rating Houses hurried afterwards – running and panting – to promote the country to the investment rating.
They hope the same will happen again now that Greece has returned to the “big category” of investment reliability, but it must not only remain in it, but also move quickly even higher.
Houses want surpluses
Athens’ big “bet” and commitment was to achieve the Budget’s goal of primary growth of 1.1% of GDP in 2023, as international organizations predicted.
But in the last few days – and shortly before the official announcement of the final result – the Budget Office in Parliament gave a higher forecast of up to 1.6% for our country. In practice it turned out to be even higher, reaching 1.86% of GDP
As Standard & Poor’s has pointed out – already from the Autumn of 2023, but also the day before yesterday – a greater upgrade of the Greek economy could only come if the debt as a percentage of GDP declines further, to levels similar to the debt of other countries with corresponding assessment.
And this, as S&P’s points out, could only happen if strong primary surpluses continue for a long period of time! Perhaps there is no better reinforcement of such expectations, than the official confirmation that in 2023 the primary surplus in Greece exceeded all imagination…
For 2024, in fact, things are more difficult, as the target for this year’s primary surplus reaches 2.1% of GDP. So a surplus of 1.9% in 2024 could be considered a failure!
After all, while primarily the country no longer produces new deficits but surpluses, in total in 2023 the year closed with a deficit of 3.5 billion euros (taking into account government expenditures of 7 billion euros for interest that does not count in the primary result but must be repaid) while the gross debt of the General Government still remains high after reaching 357 billion euros or 161.9% of the Gross Domestic Product.
“Signal” from markets
However, the market monitors – and sometimes discounts before the Rating Houses – the positive developments. Although Greece has by far the worst credit rating in the Eurozone, by today’s standards Greek bonds are already priced:
much cheaper than those of Italy, which never lost investment grade (with interest rates of 3% on 5-year bonds and 3.4% on 10-year bonds, compared to 3.4% and 3.9% of Italian ones respectively)
almost the same as in Spain (with 3% and 3.3% for 5-year and 10-year respectively)
better than Malta (interest rates of 3.3% and 3.5% respectively)
very close to echina of Portugal (2.7% and 3.2%)
with not a big difference anymore from almost all the other countries (Belgium, France, Austria, etc.) which all have almost the same interest rates, with interest rates of around 2.5%-2.7% on five-year bonds and 3% on ten-year bonds.
