Fitch Ratings has upgraded Greece’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BBB’ from ‘BBB-‘. The Outlook is Stable.
A full list of rating actions is at the end of this rating action commentary.
Key Rating Drivers
The upgrade of Greece’s IDRs reflects the following key rating drivers and their relative weights:
High
Firm Debt Decline: We forecast gross general government debt/GDP will fall by 9pp in 2025 to 145%, following a 10pp decline in 2024. This is still nearly 3x the ‘BBB’ median (52%), but it is over 60pp below the 2020 peak of 209%, representing the largest post-pandemic decline among Fitch-rated sovereigns. We expect debt to continue declining rapidly in the medium term, approaching 120% by 2030 under our baseline, supported by 4% nominal GDP growth and primary surpluses of 3.5% of GDP beyond 2027. Cash buffers remain at record high of around 18% of GDP, allowing early repayment of bilateral bonds and covering maturities over the next three years.
Continued Strong Budget Performance: Fitch forecasts a general government budget surplus of close to 1% of GDP this year, similar to the strong performance in 2024 (1.3%), and a primary surplus of 4.8%. This is a notable improvement from the 1.4% of GDP deficit in 2023 and compares very favourably with the current ‘BBB’ median deficit of 3.7%. The strong performance reflects structurally higher revenues, due to improved tax collection, and tight expenditure control.
Modest Fiscal Easing: Given the strong starting position, we expect the 2026 budget to remain in surplus, despite some fiscal easing measures included in the draft budget. Planned personal income tax cuts will have the largest fiscal impact, estimated by the government at EUR1.2 billion (0.5% of GDP), increasing to EUR1.6 billion in 2027. This will boost real disposable income of primarily middle-income households, which will in turn support growth. A further EUR600 million will be spent on housing rent subsidies and support to low-income pensioners and EUR300 million on wage increases in the defence sector.
Prudent and Credible Fiscal Framework: Recent fiscal outturns and 2026 budget plans underscore the government’s strong commitment to fiscal prudence. We view this commitment as highly credible, underpinned by the post-pandemic period record and the broad social consensus around sound fiscal policies. In July 2025, parliament adopted with a large majority a domestic fiscal rule that requires a balanced primary position. Greece overperformed the requirements of the new EU fiscal framework in 2024, the first year it was applied.
Low Financing Risks: Greece’s favourable debt profile, with a long average maturity of 19 years and concessional interest rates, as well as a very large cash reserves, significantly reduce market risks and serve as a buffer against potential shocks from bond market volatility. The underlying growth-interest rate differential is favourable, with the implicit interest rate on debt stock at about 1.5%, well below the nominal GDP growth trajectory estimated at around 4%.
Medium
Resilient Economic Growth: The Greek economy is on a steady growth path, despite various recent external challenges, including geopolitical and trade shocks. GDP growth has averaged around 2% since 2023, outpacing the eurozone growth rate. We forecast growth will remain around 2% until at least 2027, with convergence towards the eurozone income level continuing. Domestic demand will remain the key growth driver, benefiting from the last years of the Next Generation EU investment stimulus, and further improvement in households balance sheets and steady employment growth.
Greece’s ‘BBB’ IDRs also reflect the following key rating drivers:
Fundamental Credit Strength and Weaknesses: The ratings are supported by income per capita levels above and governance indicators in line with the ‘BBB’ median, as well as a credible policy framework underpinned by EU and eurozone membership. Fiscal and macroeconomic adjustment has accelerated over the past years, based on improving fundamentals and policy credibility. These strengths are set against the legacy of the sovereign debt crisis, particularly the very high but steadily declining public debt burden, the significant loss of economic output, persistent external imbalances and contingent liabilities from the banking sector.
Wide and Persistent CAD: The current account deficit (CAD) has been around 6% of GDP since 2023, significantly higher than the ‘BBB’ median of 0.3%. There was no improvement in 1H25, as the 4Q moving average CAD was EUR14.6 billion in 2Q25, compared with EUR14.4 billion in 2Q24. Structurally, the low savings rate is the main reason for the substantial CAD, with import-intensive investments expected to intensify the pressure over the medium term. Eurozone membership mitigates external financing risks and we do not expect any disruption to external capital flows.
Strengthened Bank Sector: Fitch has upgraded the ratings of the four systemic banks to investment grade during 2025, reflecting improvements in Greece’s operating environment and the banks’ credit profiles, including a longer record of sound earnings generation, the completion of most of their asset-quality clean-up, strengthened capital positions and stable deposit-based funding. Fitch expects the banking sector to benefit from resilient economic growth, sustained business growth and a gradual recovery in the retail segment.
Bank-Sovereign Link: A legacy issue is the uniquely tight link between the sovereign and the banks due to the large share of deferred tax credits (DTCs) in banks’ capital (end-June 2025: EUR12 billion or 45% of common equity Tier 1 capital). The DTCs remain a contingent liability for the sovereign, absent in all other eurozone members, despite the recent plans of banks to accelerate the amortisation of DTCs, which should help normalise their capital structures. Furthermore, the public guarantees to the senior tranches of the Hercules scheme that aims to accelerate reduction of non-performing loans in the banking system are around EUR18 billion or 8% of 2025 GDP at end-September 2025.
ESG- Governance: Greece has ESG Relevance Scores of ‘5[+]’ for Political Stability and Rights and for Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Greece has a medium WBGI ranking at 62.8 reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.
RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
–Public Finances: Stabilisation of general government debt/GDP, for example, due to structural fiscal loosening or materialisation of significant contingent liabilities.
–Macro/External: An adverse shock that would affect Greece’s medium-term growth potential or worsen external imbalances.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
– Public Finances: Further significant decline in general government debt/GDP over the medium term, driven by substantial primary surpluses and continued resilient growth.
–Macro: Improvement in medium-term growth potential and performance, for example, driven by higher investment or implementation of structural reforms.
Sovereign Rating Model (SRM) and Qualitative Overlay (QO)
Fitch’s proprietary SRM assigns Greece a score equivalent to a rating of ‘BBB-‘ on the Long-Term Foreign-Currency (LT FC) IDR scale.
Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to SRM data and output as follows:
– Public Finances: +1 notch to reflect the anticipated improvement in public finance variables that is yet to be reflected in the SRM.
Fitch’s SRM is the agency’s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.
Debt Instruments: Key Rating Drivers
Senior Unsecured Debt Equalised: The senior unsecured long-term debt ratings are equalised with the applicable Long-Term IDR, as Fitch assumes recoveries will be ‘average’ when the sovereign’s Long-Term IDR is ‘BB-‘ and above.
No Recovery Ratings are assigned at this rating level.
The senior unsecured short-term debt ratings are equalised with the applicable Short-Term IDR.
Country Ceiling
The Country Ceiling for Greece is ‘AA’, six notches above the LT FC IDR. This reflects very strong constraints and incentives, relative to the IDR, against capital or exchange controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.
Fitch’s Country Ceiling Model produced a starting point uplift of +1 notches above the IDR. Fitch’s rating committee applied a further +5 notches qualitative adjustment to this, under the Long-Term Institutional Characteristics pillar reflecting the sovereign’s membership of the eurozone currency union and the associated reserve currency status. We view the risk of imposition of capital or exchange controls within the eurozone as exceptionally low but not negligible.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. Climate Vulnerability Signals
The results of our Climate.VS screener did not indicate an elevated risk for Greece.
ESG Considerations
Greece has an ESG Relevance Score of ‘5[+]’ for Political Stability and Rights as WBGI have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Greece has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.
Greece has an ESG Relevance Score of ‘5[+]’ for Rule of Law, Institutional and Regulatory Quality and Control of Corruption as WBGI have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Greece has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile.
Greece has an ESG Relevance Score of ‘4[+]’for Human Rights and Political Freedoms as the Voice and Accountability pillar of the WBGI is relevant to the rating and a rating driver. As Greece has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.
Greece has an ESG Relevance Score of ‘4’ for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Greece, as for all sovereigns. As Greece has a fairly recent restructuring of public debt in 2012, this has a negative impact on the credit profile.
The highest level of ESG credit relevance is a score of ‘3’, unless otherwise disclosed in this section. A score of ‘3’ means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch’s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch’s ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Greece; Long Term Issuer Default Rating; Upgrade; BBB; Rating Outlook Stable
—-; Short Term Issuer Default Rating; Upgrade; F2
—-; Local Currency Long Term Issuer Default Rating; Upgrade; BBB; Rating Outlook Stable
—-; Local Currency Short Term Issuer Default Rating; Upgrade; F2
—-; Country Ceiling; Upgrade; AA
—-Senior Unsecured-Local currency ; Long Term Rating; Upgrade; BBB
—-senior unsecured; Short Term Rating; Upgrade; F2
—-Senior Unsecured-Local currency ; Short Term Rating; Upgrade; F2
Contacts:
Primary Rating Analyst
Greg Kiss,
Director
+49 69 768076 198
gergely.kiss@fitchratings.com
Fitch Ratings – a branch of Fitch Ratings Ireland Limited
Neue Mainzer Strasse 46 – 50
Frankfurt am Main D-60311
Secondary Rating Analyst
Federico Barriga Salazar,
Senior Director
+49 69 768076 145
federico.barrigasalazar@fitchratings.com
Committee Chairperson
Paul Gamble,
Senior Director
+44 20 3530 1623
paul.gamble@fitchratings.com
MEDIA RELATIONS: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@thefitchgroup.com
Additional information is available on www.fitchratings.com
Applicable Model
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
Country Ceiling Model, v2.0.3 (1)
Debt Dynamics Model, v1.3.2 (1)
Macro-Prudential Indicator Model, v1.5.0 (1)
Sovereign Climate Risk Model, v1.0.0 (1)
Sovereign Rating Model, v3.14.4 (1)
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