Greece Credit Rating Upped By Fitch One Grade To B- With Stable Outlook

Fitch ratings agency says domestic political instability -- or a poor recovery in Cyprus -- could lead to another downgrade

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Greece May Day 2013
A woman holds a Greek flag with a smaller Cypriot flag attached to it during a May Day rally in front of the parliament in Athens, May 1, 2013.

A rare nugget of good news for Greece’s economy: Its credit rating was upgraded one notch by Fitch Ratings to B- from C on Tuesday as the debt-saddled country shows signs of “rebalancing.”

The country’s long-term foreign and local currency international depository receipts -- bank certificates representing ownership of stock of a foreign company -- rose to B from CCC. Short-term foreign currency receipts leaped to B from C. And the country's ceiling inched up to B from B-, according to a statement from Fitch.

“The Greek economy is rebalancing: Clear progress has been made towards eliminating twin fiscal and current account deficits and ‘internal devaluation’ has at last begun to take hold,” the ratings agency wrote in the statement.

However, the B- rating is still considered junk status.

The price of lost output and rising unemployment left some doubts about the country’s recovery, but debt relief and eased budgetary targets have brought Greece back to a three-year high. Fitch also said the possibility of the ailing country leaving the Eurozone has decreased.

Debt buybacks and restructuring have reduced private creditors’ share of the government’s debt to 15 percent and, under the mostly German-backed economic shield of the Euro zone, Greece’s outlook has improved.

But Greece could see its rating plummet again if the country’s parliament is thrown back into political disarray amid debates about its future in the European monetary union.

And the country's neighbor Cyprus could disrupt a Greek recovery if Cyprus, an island nation that's economically and culturally linked to Greece, does not stabilize. Cyprus received the first $2.6 billion installment of bailout funds on Monday from the troika of the European Union, the European Central Bank and the International Monetary Fund.

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