Athens: Greece, fully funded for the next 12 months, hopes to finance itself on the market afterwards, but its eurozone peers say success depends on whether Athens delivers on the reforms it has promised so far.
Greece was cut off from markets in 2010 as the true scale of its debt burden became apparent. But after four years of painful measures to contain debt, two bailouts worth €240bn and a hit on private bondholders, the Greek economy is expected to return to modest growth this year.
Encouraged by falling bond yields, Greece is considering ending its four-year exclusion from bond markets by selling €1.5bn-€2bn of five-year bonds in a test issue in the first half of the year. The cash raised would complement money that Athens will get from the eurozone and the International Monetary Fund after a deal in March which unblocks the payment of overdue tranches. The certainty that Greece will have enough money over the next 12 months to cover its expenses is important because it is a condition for the IMF to keep lending to Athens even after eurozone loans stop at the end of 2014.
“We had assurance... that Greece is fully financed for the coming 12 months,” the chairman of eurozone finance ministers Jeroen Dijsselbloem told a news conference after they met.
The ministers decided the next tranche of loans they would send to Greece would be €6.3bn at the end of April. This will allow Athens to comfortably meet its large bond redemption needs in May. Greece will get two more tranches of €1bn each in the following months, although the disbursements will hinge on the government meeting specific conditions. What happens after the next 12 months, however, is still uncertain because it depends on market conditions and on the Greek economy.
Last week, a senior eurozone official said there were no plans for a third bailout, and such an option would be considered only if Athens asks for it.
“I have taken note of the optimism, or, let’s say the ambition of the Greek government, not to have another programme. Of course I would like to share that ambition, yet I think it’s too early to say,” Dijsselbloem said.
“It’s of utmost importance to focus on commitments in current programme,” he said.
Earlier, Austria’s finance minister Michael Spindelegger said Greece may not need another bailout. If Athens succeeds in attracting investors to its bonds so soon after imposing heavy losses on them in 2012, it could be a game changer that boosts its chances of servicing its debts at more affordable levels.
That would support economic recovery, and give European policymakers a chance to assert that the much-criticised currency bloc can take care of its members and help them reform.
Greek 10-year yields have fallen to about 6.5 percent from more than 30 percent in the past two years, a striking improvement in the government’s notional cost of borrowing.Reuters