After selling its first sovereign bond since seeking international bailouts four years ago, Greece has shown that it has taken a “decisive step to exit the crisis,” Prime Minister Antonis Samaras said the issuance of a five-year instrument for 3 billion euros.
The sale was at a 4.75 percent interest rate, less than the 5 percent goal, but still higher than what some analysts said was comfortable and would endure Greece to keep paying too much for what it borrows.
Samaras was having none of that as he went on TV to express his satisfaction. “The international markets have expressed in the clearest possible manner their trust in the Greek economy, their trust in Greece’s future,” he said. “They have shown trust in the country’s ability to exit the crisis, and sooner than many had expected.”
The bond was oversubscribed with Greece receiving offers of almost 21 billion euros from more than 600 investors, most of them internationally. The government settled for the 3 billion euros although it had set an initial target of 2.5 billion.
“Seriousness, good planning and coordination have been rewarded,” said Finance Minister Yannis Stournaras, who described the issuing of the oversubscribed bond as an “undoubted success,” although it will bring the investors a bonanza.
“Greece has succeeded — and this is recognized by our most critical friends and partners — in achieving an exit from the crisis, or is very close to an exit from the crisis,” Stournaras said
The Finance Ministry is now considering issuing more debt later this year, but in different forms such as 12-month Treasury bills and three-year and seven-year bonds, in order to bring the interest rate down further.
Deputy Prime Minister Evangelos Venizelos also hailed the country’s return to the markets, arguing that it was a “major achievement that Greece did not turn into Argentina or Venezuela.”
Venizelos, the PASOK leader serving in the coalition government headed by the New Democracy Conservative leader Samaras, blistered the major opposition party SYRIZA, which objected to the bond issue, accusing the leftists of being “political parasites that live off the (EU-IMF) memorandum.”
That was a reference to the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that has put up 240 billion euros ($330.7 billion) in two bailouts, most of which run out this year, and have kept the Greek economy from collapsing.
But that came with harsh austerity measures attached and SYRIZA, which is leading in polls ahead of next month’s critical elections for the European Parliament and Greek municipalities, has spearheaded the opposition. Some analysts said the bond was a ploy by Samaras to gain votes.
But Venizelos blamed SYRIZA. “They should be ashamed of themselves,” he said. “Instead of appreciating this moment of joy for the Greek economy and society, they are miserable.”
Samaras also made several references to critics in his speech, indicating that the return to bond markets will feature heavily in the campaigns for May’s local and European Parliament elections. “It is as if they are saddened by the country’s success,” he said of the government’s critics.
“We are shooting ourselves in the foot,” said SYRIZA leader Alexis Tsipras from Brussels. He accused the government of burying the discussion about further debt relief for Greece by issuing the bond.
“How can we ask for a write-off now?” he said, arguing that a restructuring of Greece’s debt before a return to international markets would have meant the country could borrow at a lower interest rate. “Instead, Greece has gone onto the markets before the elections and with a high yield,” he said.
Despite the sale of the bond, the government is planning on asking for a restructuring of the Troika loans, which could pass on the costs to the taxpayers of the other 17 Eurozone countries and make them pay for generations of wild overspending by PASOK and New Democracy governments.
Former Socialist Prime Minister George Papandreou, who negotiated the first bailout for Greece in 2010, urged the country’s political parties to seek consensus in abandoning practices that led to decades of overspending.
“No matter how many positive developments there are in fiscal terms, Greece’s future stability and security is not guaranteed unless we continue the difficult reform process,” Papandreou said in a statement e-mailed to The Associated Press.
“It would be a great shame if, two years from now, we were back in the same position, held back by the same entrenched attitudes,” he said, including those held by PASOK when he was in power before being hounded out of office in 2011 by constant protests, strikes and riots against austerity.
“Against this background, I wouldn’t overestimate this success, which is certainly very pleasing,” said Ferdinand Fichtner of the German Institute for Economic Research told the AP.
“I think what is more important is that the political situation in Greece … proves to be stable — that, I think, is what in the medium to long term will restore the confidence of capital markets,” he said.
Dimitri Mardas, economics professor at Thessaloniki University, argued that if interest rates get around 6 percent would still be too much given Greece’s miniscule growth forecast this year and high pre-existing debt — standing at around 175 percent of Gross Domestic Product.
“Can the Greek economy, with its limited dynamic, take borrowing costs of 5-6 percent, even though these are the lowest in the past four years?” he told the AP in a note. “Probably not. So the vicious circle of over-indebtedness will continue unabated.”
Mardas said the issue would likely attract investor interest due to the high returns likely to be offered. “Whoever is fast enough will take advantage of that,” he said. “But Greece will be burdened with new onerous interest rates.”
See all the latest news from Greece and the world at Greekreporter.com. Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!
