Greece has returned to the sovereign debt market
Jan Dams, economy editor from German newspaper Welt, warned Greece’s return to the financial markets is a test.
Greece successfully sold debt to private investors for the first time in three years on Tuesday, making a significant first step towards financial independence when its third international bailout ends next year.
The deal came a month after euro zone finance ministers signed off on a new loan and sketched out measures to chip away at Greece’s debt mountain after the current bailout finishes in August 2018.
It is hoped the country’s decision to invest in £2.68 billion (€3 billion) in five-year bonds will win over still-hesitant investors, as the Greek economy aims to fight it’s eurozone debt with some strategic debt.
Mr Dams said: “It is a test. A venture. Because over the last seven years, Greece has been neither the model for predictable financial policy, nor have Greek governments treated their creditors very well.
“At the beginning of 2012, the predecessor’s government forced a strong debt relief from the private creditors – ie banks, funds and life insurance companies.
“And under Alexis Tsipras outstanding debts were not paid back to the International Monetary Fund (IMF) in 2015.
“If Greece were a private individual, it would probably never receive a loan with such credit history.”
Pierre Moscovici met Alexis Tsipras in Athens earlier this week
Greek bonds have been issued for the first time since 2014, when the country’s economic crisis kicked off.
Prime Minister Alex Tsipras has hailed the bond auction as a “significant step” towards exiting Athens’ third bailout, due in mid-2018.
Greek Finance Minister Euclid Tsakalotos hailed the successful sale, saying it was “a beginning” and a sign of confidence in the country’s economy.
He said: “There will be a second and a third (market foray), to approach August 2018 with confidence and emerge from the bailouts.”
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However, the International Monetary Fund has continued to withhold its portion of the bailout amid doubts the country will be able to climb out of its debt hole – currently the deepest of any EU country, although has in principle agreed to participate in a third bailout.
Mr Dams claims this agreement, however, is “no more than a formulaic compromise” from the IMF.
Writing for German newspaper Welt, he said: “For the Eurozone partner countries, which will give some £76.9 billion (€86 billion) to Athens in the third aid programme alone, it is unlikely that joining the financial markets will be a simple matter at this time.
“Because politically, it is hardly possible to explain that Greece is now beginning to take on debts with private creditors.
“However, public creditors, the taxpayers of the other euro countries, are to forego billions of debt repayments in the coming year because the country is unable to repay.”
Greek bonds have been issued for the first time since 2014
He continued: “We should now consolidate the confidence gained, strengthen further reforms and complete the forthcoming third review of the current aid programme on time.
“How a planned debt cut of the public sector can be combined with a new borrowing of debt in the markets remains a difficult question to answer.”
Pierre Moscovici, the European Commission’s economic chief travelled to Athens on Tuesday to lend his support to Mr Tsipras’ efforts.
He said he was confident Greece was “turning a page” from its economic crisis.
Mr Moscovici welcomed Greece’s return to the financial markets, speaking of a “spectacular” improvement in the country’s situation and citing the move as “another positive signal of trust in the Greek economy.”
Greece’s successful return to bond markets may slightly improve sentiments towards the eurozone as well, coming some five years after European Central Bank President Mario Draghi brought the bloc back from the brink of splintering with a pledge to do “whatever it takes”.
Rabobank strategist Matt Cairns said: “The Greek five-year bond may have added to the improvement of sentiment around the eurozone.
“And even though Greece is not out of the woods, the fact that here was 6.5 billion euros in orders for the deal is a fairly strong commitment from the market.”