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09 April 2014

Greece to return to bond markets


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It looks certain that Greece will be returning to the markets this week for the first time in four years, hoping to raise €2.5 billion. The government, however, has been marred by scandal raising fears of a snap election and return to political instability.


As reported by Reuters, Greece will be returning to the markets on Thursday after ending its "four-year exile". Greece, which has been bailed out twice by the EU and IMF since 2010, hopes to raise €2.5 billion and expects a positive response from private investors. Its return to the bond market is an important step for Greece’s struggling economy and a move Athens would like to think signalled a move away from economic and political turmoil of the past four years.

Greece has been kept afloat by about €220 billion of EU/IMF bailout funds and about €15 billion of treasury bills. Thursday's issue would lower the country's average borrowing cost, a Greek finance ministry official said.  In a dramatic turnaround, existing Greek 10-year bond yields have fallen rapidly to about 6 per cent in recent weeks, down from about 40 per cent two years ago when the country imposed severe losses on private bondholders in a €130 billion debt restructuring.

Greece has no pressing funding needs but wants to test the waters for more and bigger bond sales in the future, as part of its strategy to cover all its funding needs from the market by 2016.

As reported by MacroPolis, however, Jens Bastian, a former member of the European Commision task force for Greece in Athens, argued that returning back to the bond markets does not signal the end of the crisis but is a narrative created by the coalition Prime Minister Antonis Samaras. He remarked that  "the recent popularity of pe ripheral bonds with global investors goes hand in hand with the efforts to talk up confidence in the Greek economic recovery narrative".

The day before Greece’s expected return to the markets witnessed Greek labour unions staging a nation wide strike ahead of Merkel’s visit to Greece on Friday. The strike came a week after Samaras’s administration was marred in a far right scandal involving one of his closest aides and Golden Dawn (GD).

On a video leaked by GD, Panayiotis Baltakos, Samara's former cabinet secretay, was shown to be engaging with GD MP Ilias Kasidiaris over the crackdown on the neonazi party in autumn 2013 following the murder of hip-hop singer Pavlos Fyssas. During the conversation, Baltakos can be heard saying that there was no evidence to substantiate the crackdown on Golden Dawn following Fyssas fatal stabbing by a GD supporter last September and that it was a tactic used by Samaras’s party to stop GD "dra wing support from New Democracy", reported EnetEnglish.

Following the video there were fears that the fragile coalition made up of the Panhellenic Socialist Party (PASOK) and New Democracy would collapse triggering snap elections igniting fears of further political instability in Greece. Snap elections were ruled out by PASOK leader E vangelos Venizelos, according to Kathimerini, but hours before Greece returned to the markets and a day before Angela Merkel's arrival in Athens, a car bomb exploded outside an annex of the Bank of Greece, reports EnetEnglish, highlighting ongoing political unrest.





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