Greece returns to the bond market: Back on track – a successful comeback?

Marcus Pahl

doi:10.15771/2199-1618_2014_2_1_6

Abstract

For four long years and reasons well known, Greece was absent from the international bond market. Its reputation as a debtor destroyed, the little Eurozone member country was unable to finance itself like all modern states do: by selling bonds to international investors. Greece had to live off hand-outs from foreign governments and behind the shield of the European Central Bank. In the spring of 2014, however, Greece regained access to the bond markets – surprising in itself, but particularly because investor demand soared and Greece could have placed many more bonds than it did. This article analyses the causes and dynamics of this odd Odyssey. Based on document, media, and financial data reviews and expert interviewing, it evaluates the comeback of Greece and provides a brief outlook concerning the future of the country’s strategic position on the financial market. The author concludes that while Greece staged a successful comeback which was partly symbolic and theatrical, it is not yet back on track as a normal nation with mainstream public debt financing. Keywords: austerity, bond markets, European elections, European periphery, Eurozone crisis, fiscal policy, GIIPS, Greece, haircut, public debt, sovereign debt crisis FULL TEXT PDF only in English (toggle language: upper right hand corner)

Highlights

For four long years and reasons well known, Greece was absent from the international bond market
Greece is a relatively modest economy, the land of ancient myths and legends became a central issue for the Eurozone
Research findings have shown that Greece lost its access to the bond markets in 2010 due to several mutually reinforcing causes

Summary

Introduction

“If you would know the value of money, go try to borrow some; for he that goes a-borrowing goes a-sorrowing.”. The recently issued Greek bonds may have been interpreted by investors informally as Eurobonds since Greece is liable for a proper repayment but the entire Eurozone (Smeets, 2014) This is strongly supported by the announcement of European Central Bank president Mario Draghi who has stated that the central bank would be willing to launch a new program of buying government bonds if inflation continues to fall or the Eurozone reverses into deflation. The comeback can be considered as repeatable This conclusion can be supported by a recent Bloomberg report quoting a Greek government official: “To avoid another bailout, Greece aims to jump-start its newly regained financial-market access. Even though many European nations honor this rule by the

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Findings

Conclusion