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Sovereign Rating Model: Greek Sovereign Rating Worse Than We Deserve

Lekkos, Ilias, Rotsika, Dimitria, Giannakidis, Haris, (2017), “Sovereign Rating Model: Greek Sovereign Rating Worse Than We Deserve”, Piraeus Bank Economic Research and Investment Strategy, February

The profound effect of sovereign credit ratings on economic activity is all too well known in the case of Greece, where the downgrade of the Hellenic Republic to below investment grade led to the “financial isolation” of the Greek state from the global financial system. Yet, given that the Greek economy stands once again on the cusp of recovery and the Greek banking system is confident and robust enough to start planning forward for the upcoming three to five years, the rating outlook of the Greek sovereign debt is coming back to the fore with a vengeance. For that reason, we have developed a sovereign rating model that allows us to examine and forecast the credit rating of the Hellenic Republic – as well as the sovereign rating of a large number of other economies – under various macroeconomic scenarios in an objective and transparent way.

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