By Lefteris Yallouros – Athens
Greece returned to international capital markets Thursday for the first time in nearly four years. The country’s bond issue was a huge success it raised EUR 3 billion (more than the EUR 2 billion initially sought). The five-year bond would price to yield 4.95%. The orderbook exceeded EUR 20 billion from some 600 investors. More than 90 pct of the issue went to long-term foreign investors; a clear vote of confidence in the Greek recovery effort.
Prime Minister Antonis Samaras hailed the long-awaited return to capital markets via a televised message. He said the bond sale “exceeded expectations,” and was “a sign of trust in the Greek economy and its ability to overcome the crisis.”
Deputy Prime Minister Evangelos Venizelos pointed out Greece returned to bond markets “under the same or even better terms than Ireland and Portugal.”
The bond sale shows Greece is heading in the right direction, and full market access is “on the horizon,” IMF Managing Director Christine Lagarde said at a press conference in Washington. European Commission Vice President Siim Kallas said the sale “should also be a reason to stay the course of reforms and strengthen the recovery under way.”
The left-wing opposition branded the government’s return to the markets as little more than a PR stunt. SYRIZA leader Alexis Tsipras said that the market run was for “petty political and communicative reasons” and described it as the equivalent of “shooting one’s self in the foot”. He also stressed a European solution on Greece’s debt restructuring is much more important than a hurried and potentially hurtful return to capital markets.
Investors in the Greek stock market did not greet the news with the enthusiasm some may have expected. The Athens Exchange general index posted a moderate drop for the sixth successive session as closing at 1.283 points, shedding 0.74 pct. The market, it appears, has factored in Greece’s return to the international markets already and is set to move higher once the news has set in and benefits become more evident for banks and listed companies alike.
Analysts jump for joy
Analysts and press from all over the world had only good words to say for Greece’s return to capital markets.
Experts from Citigroup and Credit Suisse hailed the bond issue as a great success. However, analysts from both institutions cited political uncertainty as the most serious risk to Greece’s recovery course. Citigroup in particular also added the extra dangers of sovereign debt being higher than in previous years at 177% pct of GDP while growth has yet to return despite the recession easing recently.
As far as positive press reports go, CNBC characteristically said Greece’s bond issue was a “key move” which will prove the country’s economy has regained its lost credibility. Reuters news agency said the return to capital markets was positive news, quoting a source from ING saying it would have been inconceivable about one year ago.
Germany’s Suddeutsche Zeitung wrote investors don’t consider Greek bonds dangerous anymore after three years of reforms but it also stresses the country has a long way to go before it gains full access to capital markets. The Financial Times voices a similar opinion as the paper points out “the unexpected scale of bond-buying appetite was met by scepticism from some investors who pointed out that Greece’s high levels of debt remain worrying”.
What Greece stands to gain
The immediate political gain for Greece is that the country is one step closer to escaping the constraints of its rescue programme and the accompanying reforms demanded by international lenders.
In economic terms the gains for Greece are even greater. The country can now hope to have greater access to capital than ever before in the last four years while banks will also be able borrow (and attract investors for that matter) thus offering much-needed liquidity to the real economy and cash-strapped businesses.
Greece’s sovereign debt will also take a significant step towards sustainability as developments on that front are expected after the European Parliament elections.
Terrorist attack in Athens
Earlier on Thursday, a car bomb exploded outside the Bank of Greece building in the center of Athens causing damage to surrounding buildings but no injuries. No group has claimed responsibility for the attack; however, police believes it is linked to the arrival of German Chancellor Angela Merkel in Athens Friday as well as the landmark bond issue.
Police said two anonymous calls — to a news website and a newspaper — gave a 45-minute warning.
“The evident target of the attackers is to change this image, and change the agenda,” government spokesman Simos Kedikoglou said. “We will not allow the attackers to achieve their aim.” Parties across the political spectrum unanimously condemned the attack.