Greece posts primary surplus for January-July period

Greece registered a primary budget surplus and a vast improvement in the deficit of its state budget as a whole in the January-July period, the Finance Ministry said on Tuesday. The primary surplus was 2,555 million euros, against a deficit of 3,083 million in the first seven months of last year, while the overall deficit came to 1,929 million euros, against a target of 7,528 million and 13,216 million euros in the same period of 2012.

The marked improvement brings the country a step closer to a return to international financial markets, which the government is carefully planning for the medium term, hoping to combine the timing with a piece of “good news” – rather than being forced to do it in an emergency situation.

The country’s open market borrowing costs became prohibitive in the spring of 2010 and, despite the spectacular current improvement, no one is really prepared to state with certainty when it will be in a position to safely venture out to seek the confidence vote of international investors.

The current indications suggest that this will be attempted after the government is in a position to announce the attainment of a primary surplus for the year as a whole. This is projected in the first half of 2014. The move, nevertheless, must be preceded by initiatives that will make a Greek bond issue more attractive. One measure toward this end is the merger of bonds in the secondary market. Another booster would come in the form of an exit from the recession and a return to positive growth rates, preferably in the first quarter of 2014. A further positive development would be an uninterrupted and speedier pace in the program of privatizations, that would attract mainly foreign investors.

A good start to such efforts, of evident importance, would be the merger of bonds in the secondary market that could be implemented early in the autumn, although interest is currently anaemic. Twenty Greek bonds, maturing between 2023 and 2042, are currently traded in the secondary market and investors have been briefed that the government intends to merge the 20 bonds into five new ones. The main difficulty is that investors would have to respond on a voluntary basis.