Wednesday September 3, 2014 Search
Weather | Athens
29o C
23o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Beware Greeks selling bonds as EU frets on reforms

By Nikos Chrysoloras & Marcus Bensasson

Greece’s plan to return to debt markets this year is meeting opposition from its bailout creditors, who are concerned it may allow the government to ease off on efforts to fix the economy.

The European Commission, the European Central Bank and the International Monetary Fund have expressed a view that the Greek government may repeat past mistakes if it manages to slip the shackles of its bailout program, said two officials, one from Greece and another from the European Union. They asked not to be named because the discussions are private.

Greece surrendered control of its economic and budget policy to the so-called troika when it was forced to seek emergency funding in 2010 as its finances spiraled out of control. With the ECB’s government-debt assurances fueling a rally across euro area sovereigns, Prime Minister Antonis Samaras says he intends to tap markets again, marking the end of the Greek bailout which triggered the European debt crisis.

“The troika is realizing now that when Greece had a 10 percent deficit and they had all the negotiating power, they were too focused on austerity instead of structural reforms,” said Michael Michaelides, a rates strategist at Royal Bank of Scotland Group Plc in London. “A market return would mean that some of the tougher reforms would never be enacted.”

The yield on Greece’s 10-year bond is back where it was before the debt crisis erupted, touching 6.65 percent last week, its lowest level in almost four years. The debt yielded 6.81 percent at 1:16 p.m. today local time, compared with a record 37.1 percent in March 2012.

“Greek bond yields are coming down very nicely,” said Holger Schmieding, chief economist at Berenberg Bank in London. “A two to five-year placement should not be much of a problem at a yield acceptable to Greece if nothing bad happens such as the breakup of the government coalition.”

The troika’s leverage over Samaras is already weakening. With the economy set to emerge from a six-year recession and the current account and primary budget in surplus, the premier has enough cash to pay public wages and pensions. He only needs to borrow to meet repayments on the nation’s 321 billion euros ($445 billion) of debt.

What’s more, most of this debt is held by its euro area partners, the IMF and the ECB. So even if the troika could make Greece the first nation to default on payments to its own central bank, by continuing to withhold a long-delayed tranche from the bailout facility, both financial markets and the 11 million Greeks have some protection from the fallout.

Greece doesn’t expect to win an agreement on the next tranche from euro region finance ministers who are meeting in Brussels on Monday, a Greek Finance Ministry official said in a March 8 phone interview. The Greek government hopes the troika will have completed its review of their progress by March 16, the official said. The quarterly review has now lasted more than six months.

“Talks are progressing and the atmosphere is constructive,” Simon O’Connor, the European Commission’s spokesman for economic affairs said by e-mail March 8. “Of course, there are no guarantees as to when exactly we will reach an agreement.”

Troika officials are concerned that as they lose leverage over the Greek government the country will slip back into the errors which sparked the European debt crisis, the officials from Greece and the EU said. In that scenario, euro member states may refuse another bailout, they said.

The only way to ensure Greece pushes through the changes needed to fix its economy is with a new loan, attached to strict conditions of fiscal prudence, the European official said. He cited Greece’s failure to enact all the agreed public and tax administration changes, as well as the country’s reluctance to comply with measures prescribed to free up the markets for goods and services, as examples of the government’s approach.

The government expects the EU statistics agency in April to verify that the country posted a 2013 budget surplus before interest costs, which under a November 2012 agreement between the currency bloc’s finance ministers will qualify Greece for additional debt relief measures, further easing the financial pressure on Samaras.

Interest payments on loans have already decreased from 7.8 percent of Greek gross domestic product in 2011, to 3.3 percent of GDP in 2013, Deputy Finance Minister Christos Staikouras said earlier this month, referring to successive rounds of interest rate cuts and extensions of maturities for the bailout funds. The average maturity of Greek government debt is now 17 years and the country pays about 2 percent in interest on its bailout loans, Staikouras said.

Investors searching for returns with interest rates at record lows have fueled a rally in Greek government bonds, which have outperformed any other sovereign security tracked by Bloomberg this year.

“Ideally, we would like to have no new loans from our European partners,” Stournaras said on January 9. [Bloomberg]

ekathimerini.com , Monday March 10, 2014 (14:56)  
Helexpo sell-off plan to be ready by mid-October
Maniatis talks energy with Washington’s man in Athens
Task force to examine cases of extreme taxation, customs issues
Hotels hike prices by 10 pct in H1 of 2014
Report points to suspicious clinic charges to EOPYY
A quarter of all the expenses submitted last year by private health clinics to EOPYY, the country’s largest healthcare provider, have been deemed suspicious and in need of further investigat...
New rector seeks to introduce ID checks at University of Athens
One day after his swearing-in ceremony was marred by protests against budget cuts and the expulsion of thousands of so-called eternal students, the new rector at the University of Athens, Th...
Inside News
Grateful Saviola thanks Olympiakos, joins Verona
Former Argentina international Javier Saviola has thanked Greek champions Olympiakos for the "beautiful moments" during his season-long stint in Greece as he left the club to join Serie A ou...
SOCCER
Greece defender Papadopoulos fires parting shot at Michel
International defender Avraam Papadopoulos suddenly quit Olympiakos on Monday to join Turkish club Trabzonspor, and fired a parting shot at Olympiakos manager Michel putting the blame on the...
Inside Sports
COMMENTARY
Politicized archaeology
Let us suppose that archaeologists discover that the tomb uncovered in Amphipolis was not the resting place of Roxana or Nearchos, but of Alexander the Great. Let us assume, that is, that ar...
EDITORIAL
Moderating expectations
Politics is, to a great extent, all about managing expectations, and anyone who raises that bar too high or too fast is at serious risk of disappointing and losing the people’s favor. In a c...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Helexpo sell-off plan to be ready by mid-October
2. Maniatis talks energy with Washington’s man in Athens
3. Task force to examine cases of extreme taxation, customs issues
4. Hotels hike prices by 10 pct in H1 of 2014
5. Pension system nears breaking point
6. Report points to suspicious clinic charges to EOPYY
more news
Today
This Week
1. Politicized archaeology
2. Rain and storms with hail expected in many parts of Greece
3. Reforms to dominate Greek talks in Paris, debt relief talks later, says source
4. New committee formed to assess progress of deregulation in closed-shop professions
5. Greece needs private debt overhaul, Piraeus Bank CEO says
6. Moderating expectations
Today
This Week
1. Thessaloniki mayor Boutaris sworn in wearing yellow star amid Golden Dawn protests
2. The battle against progress
3. Strong undersea quake occurs off island of Milos, felt in Athens
4. Hardouvelis, ECB executive discuss bank program, stress tests
5. Greek quest for debt relief faces hurdles in Paris
6. Prospect of Greek grand prix back on the agenda; huge investment needed
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.