Greece Gearing Up for Bailouts End, Bond Markets Return

Athens Stock Market. (Photo by Eurokinissi/Eleni Kouri)

ATHENS – With three international bailouts of 326 billion euros ($381.67 billion) expiring on Aug. 20 after more than eight years, Greece will find itself at the mercy of the markets and is planning a 10-year bond issue before that happens.

Two previous test bonds of 3 billion euros ($3.51 billion) each sold, but at interest rates more than three times the bailouts – before Greece secured a debt relief deal with the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM).

Germany’s Handelsblatt newspaper on July 16 reported the 10-year bond would be issued as a kind of test since Greece is still getting what’s left of a third rescue package of 86 billion euros ($100.68 billion) it received in the summer of 2015.

“Athens, of course, doesn’t have an immediate need for the money … Due to a liquidity reserve of up to 24 billion euros, the country can be fully financed until mid-2022, but all experts agree on this: Athens should wait so long. The country must build trust with the market through test issues,” the paper said.

The financial news agency Bloomberg said the idea of Greece getting back into the markets is creating a bit of a buzz after years of turmoil and once-hot speculation the country would leave or be forced out of the Eurozone before Prime Minister and Radical Left SYRIZA leader Alexis Tsipras reneged on anti-austerity promises to get the last bailout, calming investors nerves.

Apparently forgotten or set aside too is a former Greek government led by the New Democracy Conservatives with its junior partner, the now-defunct PASOK Socialists, stiffing investors and bond holders, including many in the Diaspora, with 74 percent losses in a failed bid to write down the debt that’s climbing by the second.

Finance minister Euclid Tsakalotos has been on a marketing tour through the world’s financial capitals amid speculation that Greece will sell more bonds this year, Bloomberg said, and  Hellenic Telecommunications Organization, the nation’s biggest corporate borrower, has attracted more than 1.8 billion euros ($2.1 billion) of investor orders for its 400 million-euro ($468.3 million) sale of four-year notes.

The government has built a budget surplus by holding back payments to vendors, but satisfied credit agencies who upped the ratings and with interest rates high enough to keep prospective investors anxious to make a killing and take a chance on a bond.

“It will definitely have demand, there’s no question about that,” Scott Thiel, a money manager in London at BlackRock told Bloomberg. “Dollar investments are very expensive and there’s nothing in Europe that’s going to offer this kind of yield.”

Greylock Capital Management – which invests in undervalued, distressed and high-yield assets and has $1 billion under management — would like to see Greece sell securities maturing in 20 to 30 years, Diego Ferro, a co-chief investment officer said.

But despite the bailouts, Greece’s debt as a proportion of Gross Domestic Product (GDP) is still the highest in Europe at 180 percent and as even Tsipras had admitted while claiming credit for a recovery was unsustainable.