|Athens ends bond market exile in successful 3b euro debt sale, but remains weakest link in euro bloc
Amid self-congratulatory, bullish pronouncements from senior Greek officials on the successful 3 billion euro, 5-year bond issue, European officials also hailed the return to bond markets as a positive sign. But analysts say caution is warranted.
Joaquin Almunia, vice president of the European Commission, the EU's executive arm, said: “To me today is a very good day from the point of view of the results after the big efforts by Greek authorities and Greek society, Greek citizens, to overcome this terrible crisis.''
In 2009, Greece was at the center of Europe’s sovereign-debt crisis.
(Pictured, Greek Finance Minister Yannis Stournaras).
The Greek finance ministry formally announced that a five-year bond sale had raised 3 billion euros at an interest rate of 4.75 percent.
“The Hellenic Republic today announces that it has agreed to sell a five-year bond in a principal amount of 3 billion euros with an annual coupon [yield] of 4.75 percent,'' the ministry said.
Earlier, Greek officials hailed the bond sale as an overwhelming success. The bond was more than 8 times oversubscribed.
Athens was initially seeking to raise 2.5 billion euros, which is a milestone for the country. Greece has been locked out of the markets since 2010.
“It's a huge success,'' Deputy Prime Minister Evangelos Venizelos said.
Greece's borrowing rates have fallen in recent months as public finances improved following four years of painful spending cuts and tax increases that were required in exchange for the bailout loans from 2010.
“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,'' Finance Minister Yannis Stournaras said during a speech in Athens.
“It seems that the world community now trusts Greece once more,'' he added in a later press conference.
But, ratings agencies still consider Greek bonds to be far from investment grade, and have given them a junk status. The country has not committed to regular auctions of long-term debt, and still draws funds from its bailout from the International Monetary Fund and other euro zone countries.
Economists at prominent think tanks in Germany cautioned against reading too much into the auction's success, noting that investors were likely cheered by the fact a further writedown on Greece's debt looks unlikely. Private investors holding Greek government bonds suffered losses of about 75 percent during a debt reduction scheme in 2012.
Ferdinand Fichtner of the German Institute for Economic Research said investors assume, given the stance of European politicians and the European Central Bank, that the probability of another debt writedown “during the lifetime of this bond is relatively small.''
“Against this background, I wouldn't overestimate this success, which is certainly very pleasing,'' he said. “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.''
Improvements in the wider economy, however, are still slow to come by. Figures released today showed the unemployment rate dipped to 26.7 percent in January from 27.2 percent in December in seasonally adjusted terms.
“Greece is back. The troubled peripheral nation, who not that long ago was on the verge of being thrown out of the currency bloc and is still many billions in debt to the IMF and its European masters ... is making a triumphant return to the bond markets,'' said Forex.com research director Kathleen Brooks.
However she sounded a note of caution about the Greek bond success.
“Overall, this debt sale is a triumph in financial terms, however ... Greece is still the weakest link in the currency bloc and if the sovereign crisis flares up once more, then Athens could struggle to stay in the euro area,'' Brooks added.—AP/AFP