New York Times: Greece not out of the woods with new 5-year-bond

25 July 2017
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Greece, long Europe’s economic problem child, is trying to prove that it has made progress in its recovery efforts by announcing plans to sell debt for the first time in years.
The proposed bond sale, the details of which were released on Monday, offered hope that Greece might at last be preparing to wean itself off the international bailouts totaling 326 billion euros, or about $380 billion, that it has relied on since 2010 to stay afloat.

The sale is a pivotal moment in the painfully fought efforts of Greece to recover from troubles stemming from the financial crisis that began on Wall Street nearly a decade ago and that at one point threatened to break up Europe’s currency union.

If investor interest is strong, it would be a landmark moment, not only for Greece but also for the eurozone, the 19 countries that use the euro. If Greece struggles to find buyers, however, the debt sale could represent yet another blow for a country that has only recently started to see signs of a turnaround after nearly veering out of the currency union just two summers ago.

In a statement issued later in the day, the office of Prime Minister Alexis Tsipras described the move as “a significant step” for Greece that would help it “gain sustainable and stable access to the international markets.” While the government has not explicitly said what the proceeds from the sale will be used for, the bulk of the sale is expected to be used to roll over existing debt.
Ireland and Portugal, which were also severely affected by the euro crisis, exited their international bailout programs several years ago and are experiencing economic revivals. The eurozone recovery has also been gathering pace, with annualized growth at 2.3 percent in the first quarter, stronger than that of the United States.

The upcoming offering of five-year bonds — Greece has previously issued Treasury bills — does not mean that the country is out of the woods. It is just the first of several steps that Athens must take to test whether it can raise money in international markets to support its economy and government operations when the latest bailout, worth €86 billion, expires in August 2018.
The sale is likely to be dominated by institutional investors, eager to snap up bonds that provide a hefty return (albeit in return for considerable risk), especially when compared to lower-yielding assets elsewhere in Europe.

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