Greece | Tsipras lays out prospect of bond market return

Protesters take part in an anti-government rally outside the Greek parliament

Greece’s prime minister said yesterday that his bailout-reliant country will “very soon” be in a position to tap bond markets again, which would be Greece’s first test of investor sentiment since 2014.

Alexis Tsipras told his cabinet that this was a result of last week’s deal with European creditors, which eased fears Greece might face another brush with bankruptcy this summer.

That’s evident in the sharp fall in the interest rates the markets are ascribing to Greek government bonds. The yield on the benchmark 10-year stands at 5.5 percent, way down on the levels seen during the more acute phases of the Greek debt crisis.

“I believe that in the near future the downwards trend of yields will continue, so that we can very soon be in a position, under very good terms, to make our first trial effort to tap markets,” Tsipras said.

For Greece to end its bailout program next summer, it will have to be able to borrow on bond markets at affordable rates for the money it needs to meet its debts.

The country’s only bond issue since it became dependent on international bailouts seven years ago was in May 2014, when it raised 3 billion euros with a 4.75 percent coupon.

But Tsipras’ election in early 2015 on promises to ditch bailout-linked austerity and his subsequent confrontational negotiations with creditors — which led to a third bailout and even more austerity — drove borrowing costs out of reach again.

Yesterday, Finance Minister Euclid Tsakalotos was due to travel to London for two days of talks with international investors.

A finance ministry statement said Tsakalotos would be presenting the new prospects of the economy after the June 15 agreement with European creditors, which it said would boost investor confidence in the Greek economy.

Under the deal, which was delayed by months of haggling, the 19-country eurozone cleared the release of a further 8.5 billion euros (USD9.5 billion) after Athens accepted a batch of measures that will see further tax hikes and pension cuts through 2020. Greece acutely needs the money to meet a debt repayment hump next month.

Eurozone members also professed readiness to ease the burden of Greece’s debt repayments at the conclusion of the current bailout program.

The country has depended on rescue loans since 2010, when it was locked out of bond markets following revelation it had under-reported key financial data. To secure the funds, successive governments imposed resented tax hikes, income cuts and market reforms to reduce state spending and boost competitiveness.

Although the country has now balanced its books, it is still lumbering under past debts equivalent to 180 percent of annual economic output. The austerity cuts deepened a recession that wiped 27 percent off the economy, while unemployment hit record highs and is still around 23 percent. Nicholas Paphitis, Athens, AP