ATHENS – [ANA-MPA]
Cyprus, Greece and Portugal have each been upgraded three times by Fitch Ratings since 2022, driven primarily by rapid government debt reduction that outpaced the eurozone average, Fitch Ratings says in a new report released on August 25.
Debt/GDP ratios fell sharply from their 2020 peaks in all three sovereigns, leaving them well below pre-pandemic levels, in contrast to only a modest decline across the euro area. This deleveraging improved Fitch’s Sovereign Rating Model output, while stronger banking-sector health in Cyprus and Greece, and Portugal’s external position, allowed Fitch to remove negative Qualitative Overlay adjustments that had constrained the ratings, enabling multi-notch upgrades.
Fitch affirmed Greece at ‘BBB’/Stable and Cyprus at ‘A-’/Positive in May 2026, and revised Portugal’s Outlook to Positive while affirming its rating at ‘A’ in March 2026.
Strong growth was the largest contributor to deleveraging, but it was not what set the three apart: Spain and Italy enjoyed similar tailwinds, yet each recorded only a single-notch net gain from pre-pandemic levels, against three notches for Cyprus, Greece and Portugal. The difference was fiscal: the three moved to sustained, policy-driven primary surpluses, whereas Italy has run only small surpluses since 2024 and Spain none at all. Growth alone did not deliver these surpluses.
Greek economy grows 22% in 2021-2025
In its commentary on ‘Sovereign Rating Upgrades in Southern Europe’, Fitch said that Greece’s economy grew by 22% during 2021-2025, against the EU’s nearly 13.5%. Greece’s public debt declined from nearly 290% of GDP in 2020 to 146% of GDP in 2025, registering the greatest absolute reduction between the three countries – Cyprus, Greece and Portugal – with the rating agency foreseeing its further drop to 125% by 2029. Compared to the pre-pandemic levels, it is nearly 37 percentage points lower, while compared to the eurozone overall it is nearly 4 percentage points higher. The growth of the Greek economy by 22% in 2021-2025 contributed, according to Fitch’s calculations, to the Greek debt’s reduction by 36 percentage points.
However, as the supportive forces are fading – the tourism rebound is complete, EU Recovery and Resolution Facility funding will peak in 2026 and negative real funding costs are unwinding – “primary surpluses will bear more of the deleveraging burden, just as maintaining them becomes more demanding amid ageing populations, rising defence commitments and eroding political consensus. A lesson for Europe’s other high-debt sovereigns, which include Austria, Belgium, France, Finland and the UK, is that durable rating upgrades are built on primary surpluses sustained across years and successive governments, not on favorable macroeconomic conditions alone.
