Greece will not be able to return to bond markets next year to help plug an estimated 11-billion-euro financing gap that will start to open up, market sources said this week, contrary to earlier suggestions from the government and its European partners.
With pressure mounting on eurozone officials to find a solution to the 4.4-billion-euro shortfall the International Monetary Fund projects will kick in from August 2014, and widen by a further 6.5 billion euros in 2015, more debt relief now seems all but inevitable for Athens.
“The troika will not likely be able to avoid new bailout discussions before the end of 2014 in order to plug the gaps, and is very likely to decide on an extension,” said Barclays in a research note.
“We do not see how Greece could possibly return to the markets next year, even if recent developments have been very positive.”
European Union officials – who believe the size of the gap next year is somewhat smaller at 3.8 billion euros – see the issuance of short-term bonds as an option to make up the shortfall, alongside utilizing unused funds earmarked for the country’s bank recapitalizations and/or new loans.
Bankers, however, say the country will struggle to convince investors to buy its bonds, especially given that further restructurings are not out of the question.
“With so much uncertainty hanging over their heads, investors just wouldn’t be interested,” said one senior SSA banker in London.
As a temporary solution, the country could up its treasury bill issuance, wrote JP Morgan in its Europe Economic research note on Thursday.