Greece may soon head for bond mar­ket test

Kuwait Times - - BUSINESS -

Greece is ex­pected to re­turn to the bond mar­kets in 2018, but hav­ing se­cured its third bailout pro­gram Athens may test the wa­ters by is­su­ing a new bond as early as to­day. Greek news­pa­pers have been spec­u­lat­ing that a bond mar­ket test could come in “a mat­ter of days”. “Mon­day is prob­a­bly the day even though noth­ing can be taken for granted,” Avgi, the rul­ing Syriza party news­pa­per said on Satur­day.

The con­ser­va­tive Kathimerini news­pa­per re­ported that Athens ap­pears will­ing to “take ad­van­tage of the cur­rent pos­i­tive con­jec­ture in the mar­kets”. It said that mar­kets are in a mood for tak­ing risks right now and there are high lev­els of liq­uid­ity. It seems to be a toss-up whether Athens will take the plunge or not.

Low rate loans

“It is be­ing dis­cussed... Prepa­ra­tions are made for both sce­nar­ios and what­ever hap­pens we will be ready,” a source with knowl­edge of the gov­ern­ment’s plans told AFP on Fri­day. Greece has no im­me­di­ate need to draw money from the bond mar­kets. The Euro­pean Sta­bil­ity Mech­a­nism (ESM) will keep feed­ing the debt-rid­den coun­try with low rate loans un­til the end of the bailout pro­gram in July 2018.

This fund­ing gives Athens the chance to test with­out ma­jor risks its cred­i­bil­ity in the cap­i­tal mar­kets af­ter a tu­mul­tuous pe­riod of Grexit scares, hard de­ci­sions and painful re­forms. And last week euro­zone fi­nance min­is­ters ap­proved the lat­est 8.5 bil­lion-euro dis­burse­ment, just in time for Athens to meet ma­jor debt re­pay­ments and avert a de­fault. The Greek econ­omy nearly col­lapsed in 2010 un­der a moun­tain of debt and it had to be bailed out by its euro­zone part­ners three times to pre­vent it bring­ing down the sin­gle cur­rency bloc.

Ac­cord­ing to Euro­pean Com­mis­sion fig­ures the tide is turn­ing for Greece. It ran a bud­get deficit of 15.1 per­cent in 2009, which had been turned into a sur­plus of 0.7 per­cent last year, and it is ex­pected to post fur­ther progress this year as more sav­ings are found. The Euro­pean Union, in a fur­ther boost for Athens, rec­om­mended Wed­nes­day that Greece has made enough progress in bal­anc­ing its bud­get to be re­moved from the EU “deficit black­list”, the spe­cial over­sight of gov­ern­ment spend­ing. Also, the Eurogroup’s state­ment last month paves the way for Greece to re­turn to the mar­kets by stress­ing that “fu­ture dis­burse­ments should cater not only for the need to clear ar­rears but also to fur­ther build up cash buf­fers to sup­port in­vestors’ con­fi­dence and fa­cil­i­tate mar­ket ac­cess”.

‘Rather early’

Some cred­i­tors also seem to be sup­port­ive of an im­mi­nent mar­ket test for Greece. The ESM man­ag­ing di­rec­tor Klaus Regling said on Mon­day that it was “a good mo­ment” for Greece to con­sider how to re­turn to cap­i­tal mar­kets, point­ing out that Ire­land, Por­tu­gal and Cyprus had done so “be­fore the end of their (bailout) pro­grams”. “Greece’s re­turn to the mar­kets is the step that ev­ery­one is wait­ing for” Euro­pean Com­mis­sioner for Eco­nomic and Mon­e­tary Af­fairs Pierre Moscovici said on Wed­nes­day. But other voices are cau­tion­ing Athens not to jump into the cap­i­tal wa­ters too soon. Bank of Greece Gover­nor Yan­nis Stournaras said on Tues­day that it was “rather early” for a re­turn to the bond mar­kets. In an in­ter­view with the Wall Street Jour­nal he said “it would be even bet­ter, for in­stance, if Greece pro­ceeds with two or three em­blem­atic pri­vati­sa­tions in the pe­riod to come. That would be more help­ful to tap mar­kets later.”Also mar­ket sen­ti­ment may be­come volatile from Septem­ber given pos­si­ble changes in ECB mon­e­tary pol­icy or in Ger­many’s elec­tion re­sults, the Kather­ine daily noted. Last time Greece is­sued bonds was in 2014 un­der the coali­tion gov­ern­ment of An­to­nis Sa­ma­ras with a yield of 4.95 per­cent. The goal of cur­rent Prime Min­is­ter Alexis Tra­ship is a lesser yield, ac­cord­ing to the con­ser­va­tive pa­per. —AFP

THES­SA­LONIKI: Greek Prime Min­is­ter Alexis Tsipras (R) and Pres­i­dent of the Euro­pean Com­mis­sion Jean-Claude Juncker (L) meet ahead of a cer­e­mony to award Juncker with an hon­orary doc­tor­ate by the Aris­to­tle Univer­sity of Thes­sa­lonik. —AFP

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