Greece returns to debt markets after three-year hiatus

Athens (AFP) –


Greece returned to the debt markets for the first time in three years on Tuesday, with reports saying it was on track to raise funds at a lower cost than last time, marking a symbolic victory for the beleaguered eurozone nation.

While results were not expected until later in the day, Greek media reported that the yield -- the financing cost for the government or the rate of return for investors -- on the five-year bonds could come in between 4.75 and 4.875 percent.

That is slightly below the 4.95 percent in Greece's last auction of bonds in 2014, which reportedly was the target the Greek government had set for itself in the new offer.

The government announced Monday it was attempting a comeback to the debt markets, which it considers a test of confidence.

Greece currently has no real need to draw money from the bond markets as it recently received renewed financial support at lower rates under its international bailout that should see it through until next year.

However it is a psychological milestone, demonstrating that Greece is back on the road to weaning itself off bailout aid.

It is also an opportunity for Prime Minister Alexis Tsipras to shore up support for his Syriza party.

The party, in power since January 2015, has seen its popularity plummet since doing a 180-degree turn by accepting more spending cuts and tax hikes in exchange for a third package of international bailout loans.

The Greek economy nearly collapsed in 2010 under a mountain of debt and the government had to be bailed out by its eurozone partners. While Tsipras had swept to power on pledges to end austerity and bailouts, he backed down when Greece was again on the brink of the abyss, facing a possible exit from the euro.

But the clash with borrowers killed off a nascent recovery, with the Greek economy stagnating in 2016, although it is expected to post modest growth of 2.1 percent this year.

- 'Pivotal moment' -

A successful return the markets would support the narrative that Greece is again on the road to recovery, which would provide relief to both Tsipras's governemnt and its creditors, Greece's eurozone partners and the International Monetary Fund.

EU economy commissioner Pierre Moscovici, who was in Athens on Tuesday, called it a "pivotal moment" for Greece.

He said Tuesday that the country is making a "spectacular recovery" that should allow it to "progressively return" to the debt markets, according to a statement released by the office of Greek President Prokopis Pavlopoulos after the two met.

At a later press conference Moscovici expressed confidence Greece would be able to finance itself on the markets at a reasonable rate.

The return to the markets comes after tension over Greece's latest bailout programme in recent months eased.

Earlier this month, eurozone finance ministers approved the latest 8.5 billion-euro ($9.9-billion) disbursement from a third international bailout, just in time for Athens to meet major debt repayments.

The European Stability Mechanism (ESM) will also keep feeding the debt-ridden country with low interest rate loans (0.8 and 1.8 percent) until the end of the bailout programme in August 2018.

Meanwhile the IMF last week approved a one-year, $1.8 billion loan programme for the country.

This gives Athens the chance to test without major financial risks its credibility in the markets.

Moreover, the IMF funds, which are contingent on the eurozone finally reaching a deal to reduce Greece's colossal 314-billion-euro debt burden, should keep up pressure to make the country's finances sustainable on a long-term basis.

Debt relief has been the major bone of contention between the government of Tsipras and the eurozone, which had delayed the deal to disburse the latest bailout funds.

Moscovici said Tuesday that debt relief could come once Greece successfully implements promised reforms and completes its last year under the bailout programme, although he said a decision on fresh measures may come earlier.