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Greek Financial Crisis as Borrowing Costs Decline

ATHENS, Greece (AP) — Greece’s finance ministry says the lower cost and stronger investor appetite for the country’s latest short-term debt issue bodes well for a long-anticipated return to bond markets in the near future.

The yield investors demanded to buy Tuesday’s regular issue of six-month treasury bills fell to 3.01 percent, from 3.6 percent in March. The issue was three times oversubscribed and raised 1.3 billion euros ($1.8 billion).

Greece has been unable to sell long-dated debt since it nearly went bankrupt four years ago, but has maintained a market presence through regular treasury-bill issues. It has survived on international bailouts conditional on stringent austerity measures and wide-ranging economic reforms.

Deputy Finance Minister Christos Staikouras said Tuesday’s auction shows Greece is on “a return trajectory” to global markets.

Image from the Associated Press.

Image from the Associated Press.

Without specifying when exactly, the government has said it will issue about 2 billion euros worth of 3- or 5-year bonds by July, earlier than initially hoped as its borrowing costs have fallen in bond markets amid an improvement in public finances and progress in its talks with bailout creditors.

“This has allowed us to re-establish lost credibility and place us in a position where we should be able within the foreseeable future to tap international capital markets,” Administrative Reform Minister Kyriakos Mitsotakis told the AP Tuesday.

Media speculation has been high that the bond issue could be as early as this week, but Finance Minister Yannis Stournaras indicated on Monday that there is no hurry to bring out the bond before Greek Easter, on April 20.

Greece sold its last long-term bond in early April 2010, a month before the bailout deal, when it paid 5.9 percent for a 7-year issue. Ten-year borrowing costs are now at the lowest since early 2010. However, major ratings agencies still list Greek bonds as below investment grade, and two years ago the country forced private investors to take a 75 percent loss on their Greek bond holdings.

Unions have called a general strike Wednesday to protest the ongoing income cuts, tax hikes and record-high unemployment.

Mitsotakis said the dissatisfaction is “only natural.”

“We never promised miracles and we never said the situation is going to dramatically improve from one moment to the next,” he said.

“Having said that, if you just compare Greece today to where it was two years ago when the whole topic of discussion was not Greece’s remarkable comeback but whether Greece would be able to stay within the eurozone, I think that the progress has been overall quite remarkable.


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