International money markets may be sending positive signals, but Greece’s creditors have yet to give the green light for the government to return to a normal pattern of borrowing from market investors.
While potential bond buyers appear willing to revert to buying “Greek risk,” the troika – i.e. the representatives of the European Commission, the European Central Bank and the International Monetary Fund – is putting up obstacles in the way of the government and the markets by demanding guarantees that such an endeavor will succeed.
The Finance Ministry intends to supply such guarantees, according to senior officials who told Kathimerini that investor pressure for a new Greek bond are strong.
With the yield of the benchmark 10-year bond dropping below 7 percent for the first time since Greece entered the bailout mechanism, it appears that “the markets have started pricing in a new issue of five-year bonds during April,” a London-based analysts told Kathimerini. The same source added that as long as there is no particularly negative news coming from Greece, the government could safely issue five-year bonds in April and the interest rate could even drop below 6 percent. As an example of the kind of news that may be potentially damaging, the same analyst cited the possibility of a 1-billion-euro hole appearing in the budget if the government has to pay back money slashed from the salaries of certain categories of civil servants after the Council of State deemed them unconstitutional.
Ministry officials insist that any attempt to tap the global markets will only take place in the second half of the year, but sources close to the prime minister have not ruled out the possibility of a bond issue even before the May European and local elections.
Regardless of when that attempt takes place, Athens will first have to persuade its creditors that it will be successful. The troika disagrees on Greece’s return to the markets, using the argument that the economy still lacks the conditions for a successful bond issue.
In this context the Finance Ministry is expected in the next few days to present the troika with the guarantees needed to prove that a five-year issue of 1.5-2 billion euros can succeed. That should serve to prove the extent to which the troika’s opposition is genuinely based on financial concerns or has other, political motives.