Recovery Speeding, Greece Sells Treasury Bill, Raises 487.5 Million Euros

FILE - A man walks outside the headquarters of the Bank of Greece, in central Athens, on Monday, Jan. 28, 2019. (AP Photo/Petros Giannakouris)

ATHENS – With confidence building over Prime Minister Kyriakos Mitsotakis’ reaching out to foreign investors and kick starting stalled major projects, Greece raised 487.5 million euros ($544.4 million) in a treasury bill sale at a negative interest rate.

It was the first debt auction of the year as the New Democracy government tries to accelerate a slow recovery some 17 months after the end of nine years of three international bailouts of 326 billion euros ($362.37 billion.)

Mitsotakis in July 7, 2019 snap elections ousted the former ruling anti-business Radical Left SYRIZA that had stymied the 8-billion euro ($8.89 billion) development of the abandoned Hellenikon International Airport, renovation of the port of Piraeus and had hard-core elements trying to keep out foreign companies.

A 29 percent corporate rate set by SYRIZA also drove off interest from major foreign investors but that has already been cut by the Conservatives who plan to drop it even further next year, to 20 percent.

Still, Greece hasn’t been able to make a full market return although Mitsotakis has gone to other European Union countries as well as the United States seeking investors and planning to cut through the country’s notorious bureaucratic red tape to help.

The Public Debt Management Agency said the 13-week T-bills were auctioned Jan. 8 at a yield of -0.08, showing greater interest from investors and the markets as Greece struggles back from an economic and austerity crisis that cut the Gross Domestic Product (GDP) nearly a quarter.

The government is betting on favorable market conditions to try and convince European bailout creditors to ease Draconian fiscal targets although the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) will monitor the economy for years.

Greece must hit a primary surplus target of 3.5 percent of GDP, not including the interest on the debt, the cost of running cities and towns, state enterprises, social security and some military expenditures to prevent automatic spending cuts from being triggered.

Mitsotakis is keen to lower that benchmark, saying it’s preventing a faster recovery, noting that the government plans to pay higher interest loans from the International Monetary Fund in Washington which took part in two first bailouts.

In Washington Mitsotakis met with the new head of the IMF, Kristalina Georgieva. A Greek official on the visit said that the early repayment plan was discussed at the talks, said the Associated Press, adding the official asked not to be named.

Greece concluded its first early repayment to the IMF in November, while negative interest rates at a debt auction were achieved for the first time the previous month but  full return to markets has been hindered by the country’s weak credit rating which has remained below investment grade for nearly a decade.

The major ratings agencies are all scheduled to review Greece’s sovereign status later this year, starting in late January. The Mitsotakis government has promised to return Greek bonds to investment-grade status — requiring an improvement of at least three notches in most cases — in 2021.

The Greek national debt was expected to be 173.3% of GDP in 2019, easing to 167% to this year, according to a national budget forecast as even the three bailouts that began in 2010 failed to slow the country’s soaring debt.

Mitsotakis said he’s trying to reverse what he called onerous policies set by SYRIZA, which ruled for 4 ½ years before being defeated.

 

(Material from the Associated Press was used in this report)

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