Portugal, Cyprus and Greece have achieved faster reductions in their public debt-to-GDP ratios from the high levels recorded in 2020, thanks to strong fiscal management and sustained primary budget surpluses, according to a special report by ratings agency Fitch Ratings.
Fitch said the three countries have each been upgraded by three notches since 2022.
According to the agency, while the eurozone as a whole has recorded only modest reductions in public debt since the pandemic, accelerated deleveraging in countries such as Cyprus and Greece has fundamentally improved their standing in Fitch's Sovereign Rating Model.
The report states that stronger banking-sector health in Cyprus and Greece, alongside Portugal's external position, enabled Fitch to remove qualitative constraints that had previously weighed on their ratings, paving the way for multiple upgrades.
Fiscal discipline sets them apart
Fitch noted that strong economic growth has been the main driver behind debt reduction in Cyprus, Greece and Portugal.
However, the agency stressed that growth alone does not distinguish the three economies from the rest of the eurozone.
Instead, their key differentiating factor is fiscal policy, which has generated sustainable primary surpluses and accelerated the pace of debt reduction.
Challenges ahead
Despite the progress, Fitch cautioned that the favourable conditions that have supported debt deleveraging are unlikely to last indefinitely, citing an increasingly challenging international environment.
Cyprus rating affirmed
The report follows Fitch's decision in May to affirm Cyprus's long-term foreign-currency sovereign credit rating at A- with a Positive Outlook.
At the time, Fitch said Cyprus's ratings reflected:
- Per-capita income levels above the average for A-rated sovereigns.
- Strong fiscal performance.
- Policy credibility supported by EU and eurozone membership.
The agency added that the positive outlook is driven by continued debt reduction and favourable growth prospects, which are strengthening both fiscal and external resilience.
Fitch also highlighted that Cyprus's fiscal performance continues to outperform both the eurozone average and other A-rated countries, supported by a strong commitment to sound public finances and a favourable macroeconomic environment.
