Greece says decisions on new bond issue after next week’s Eurogroup

Greece says decisions on new bond issue after next week’s Eurogroup

The Greek government could discuss the timing of a possible new bond issue after next week’s meeting of eurozone finance ministers which is expected to decide on debt relief measures for Athens, the economy minister said.

Heavily indebted Greece, shut out of bond markets in 2010, has gone to the markets twice over the last 12 months in a bid to build a cash buffer that could reassure investors after its third bailout program ends in August.

“All our efforts are focused on the Eurogroup of the 21st (of June) where we expect to have an agreement on debt relief,” Greece’s Alternate Minister of Economy and Development, Alexis Charitsis, told a news conference on Wednesday in Brussels.

Asked whether Greece could issue new bonds before the end of its bailout program, he said: “Any other discussions happen after the 21st.”

The Eurogroup of eurozone finance ministers will discuss possible new debt relief measures for Greece the meeting in Luxembourg.

EU officials have repeatedly said next week’s meeting will be crucial to seal Greece’s financial future, as decisions will need to be made on the use of about 40 billion euros ($47 billion) that are still unspent under the 86-billion-euro eurozone-funded bailout program which expires on Aug. 20.

Officials are considering several options to reduce debt servicing costs for Athens, including an extension of maturities and grace periods of up to 15 years on some 130 billion euros of loans issued to Greece under the second bailout.

They are also considering a buy-out of expensive loans worth more than 20 billion euros from the International Monetary Fund and eurozone central banks due over the next decade.

They would be replaced with cheaper loans from the European Stability Mechanism, the eurozone bailout fund.

In exchange for accepting strict oversight of the implementation of structural reforms, including on tax and pensions, Greece could also get next week new loans of about 11 billion euros, a senior Eurogroup official said on Wednesday.

The loans, along with money already accumulated, would create a cash buffer for Greece that would cover Greece’s borrowing needs for the next 18 to 24 months. It could amount to about 20 billions, officials said.

That would facilitate Greece’s full return to market financing, and could allow Athens to issue bonds when market conditions are better and yields lower, over the next 18 months.

Athens returned to market financing with a five-year bond in July 2017 and issued a seven-year bond in February, which contributed to the cash buffer.

Reuters exclusively reported last week that Greek authorities had decided to push back by a few months plans for a new bond issue due to increased political risk in Italy that has rocked euro zone debt markets. [Reuters]

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