Wednesday, July 26, 2017

Greek bond sale wins rare praise from Germany’s Schäuble

by Kerin Hope

Financial Times

July 26, 2017

Two years ago Wolfgang Schäuble said “it would be better” for Greece to leave the eurozone. But in rare praise this week Germany’s steely finance minister struck a much warmer note.

“Greece has carried out many reforms and is on a good path,” said Mr Schäuble in a media interview — support that shows how far the country has come since the EU’s tense five-month stand-off in 2015 with the leftwing government of Alexis Tsipras.

His comments came in the same week that Greece returned successfully to the sovereign debt market with a €3bn bond offering, which was more than twice subscribed. A buoyant Mr Tsipras hailed the issue as “the most significant step towards ending this unpleasant adventure of the memorandum [bailout].” Euclid Tsakalotos, the finance minister, said Greece would hold another two or three bond sales in the coming months with the aim of building a sufficient cash buffer to keep the government afloat after it exits an €86bn bailout in August next year.

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Tuesday, July 25, 2017

Greece stages a welcome return to capital markets

Financial Times
Editorial
July 25, 2017


It is precisely five years since Mario Draghi declared the European Central Bank ready “to do whatever it takes” to preserve the euro. With the eurozone’s recovery in full swing and the ECB starting to edge towards an exit from stimulus, there could be few better ways to mark the anniversary than a successful sovereign bond issue by Greece — the biggest casualty of the single currency area’s debt crisis.

The €3bn sale of a 5-year bond — of which about half came from existing investors who swapped their holdings of debt maturing in 2019 — is a tentative first step. It may say as much about investors’ desperate search for yield as it does about Greece’s rehabilitation with capital markets (a yield of 4.625 per cent on the new bond is less impressive than it seems, given the negative yield on German 5-year debt). Yet it is still a breakthrough to be celebrated.

The last time Athens was able to raise money on the open market was in 2014, shortly before the radical Syriza coalition arrived in government, throwing Greece’s bailout programme into disarray. Yet for all the turbulence, investors who bought those bonds — even as recently as February — stand to make a healthy profit.

Yesterday’s bond sale is a reflection of the progress Greece has made and a precondition of further progress.

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Greece Gets Solid Demand for First Bond Issuance in Three Years

by Nektaria Stamouli, Christopher Whittall & Emese Bartha

Wall Street Journal

July 25, 2017

Greece got solid demand Tuesday for its first bond issuance in three years, in what the government sees as the first of several moves that will enable the debt-ridden country to wean itself from new bailouts.

Tuesday’s deal included an invitation for holders of a bond coming due in 2019 to swap their securities for new ones due in 2022.

Greece sold €3 billion worth of the 2022 bond, Greek government officials and bankers said. About half of that is new money, and half is existing investors in the 2019 bond who switched, according to one of the banks managing the deal.

The new bond matures in August 2022 and will yield 4.625%. The 2019 bond is yielding around 3.2%, so investors will be paid a decent premium for participating in the swap.

Greek bonds have been on a tear of late. Greece paid €102.60 per €100 face value of the 2019 bond. A year ago, the bond was trading below €90.

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Greece Raises EU3 Billion in Bond Market Return After 3 Years

by Sotiris Nikas, Eleni Chrepa & Lyubov Pronina

Bloomberg

July 25, 2017

Greece raised 3 billion euros ($3.5 billion) in its first tapping of the bond market since 2014, with investors piling in on expectations the worst may be over for what was once the epicenter of Europe’s debt crisis.

Yield-hungry investors welcomed the new Greek paper, which carried a 4.625 percent yield. The sale by the sub-investment-grade rated country drew 6.5 billion euros in more than 200 offers, said a Greek government official, requesting anonymity because the information is not public. Greece’s last five-year bonds in April 2014 priced at 4.95 percent. Greece sold the new bonds along with a tender offer for the notes due 2019.

With the sale, the government of Prime Minister Alexis Tsipras is seeking to chalk out a path for an exit from the current bailout program, which ends in August 2018, while also capping the country’s financing needs in 2019 -- expected to be about 19 billion euros. Greece decided to test the markets after it failed to convince creditors to immediately reduce its debt burden and was left out of the European Central Bank’s bond-purchase program.

The outcome “was better than we expected,” Greek Finance Minister Euclid Tsakalotos said in comments broadcast live on state-run ERT TV. “This is not the end. There will be a second and a third” bond sale to ensure the country exits its bailout program in August 2018, he said.

“Tsipras left behind ‘collision economics’ a long time ago, and has apparently decided that the best strategy for re-election in 2019 is to exit the bailout program,” Nicholas Wall, manager at Old Mutual Global Investors, said in e-mailed comments.

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Monday, July 24, 2017

Greece Looks to Turn a Corner After Years of Economic Pain

by Liz Alderman

New York Times

July 24, 2017

Greece, long Europe’s economic problem child, is trying to prove that it has made progress in its recovery efforts by announcing plans to sell debt for the first time in years.

The proposed bond sale, the details of which were released on Monday, offered hope that Greece might at last be preparing to wean itself off the international bailouts totaling 326 billion euros, or about $380 billion, that it has relied on since 2010 to stay afloat.

The sale is a pivotal moment in the painfully fought efforts of Greece to recover from troubles stemming from the financial crisis that began on Wall Street nearly a decade ago and that at one point threatened to break up Europe’s currency union.

If investor interest is strong, it would be a landmark moment, not only for Greece but also for the eurozone, the 19 countries that use the euro. If Greece struggles to find buyers, however, the debt sale could represent yet another blow for a country that has only recently started to see signs of a turnaround after nearly veering out of the currency union just two summers ago.

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Greece names six banks for first bond issue since 2014

Financial Times
July 24, 2017

The Greek government has hired six banks to manage its return to the international bond markets after three years.

Goldman Sachs, Citi, Deutsche Bank, HSBC, BNP Paribas, and Bank of America Merrill Lynch will manage the deal to issue a five-year bond maturing in 2022 – Greece’s first since 2014. The new debt is due to launch tomorrow.

Greece’s left-wing Syriza government has eyed a return to the debt markets to underscore its economic rehabilitation after it was bought to the brink of a eurozone exit two years ago. The government has managed to secure its latest tranche of bailout cash and is looking to slowly build up its cash buffers ahead of the end of its current rescue programme in August 2018.

On Friday, S&P ratings upgraded its outlook on Greek government debt from stable to “positive” on the back of hopes the country will receive further debt relief from its EU creditors.

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Sunday, July 23, 2017

Greece on brink of return to sustainable growth, economists believe

by Tim Wallace

Daily Telegraph

July 23, 2017

Greece could be close to returning to sustainable economic growth at last after almost a decade of devastating recessions and crises, economists believe.

The country’s government is getting closer to restoring a degree of financial stability through the latest round of talks with the EU and the International Monetary Fund. After several false dawns, UBS’s chief economist for the region hopes that only a few more steps could be required to put the troubled economy firmly on the right track.

Gyorgy Kovacs believes that finalising the debt relief plan combined with Greece’s inclusion in the European Central Bank’s bond-buying programme would be one serious improvement, and that further improvements in economic sentiment, with the liberalisation of capital controls, is another.

“What we have seen is that, compared to the first quarter, there has been a positive turn in the economy. If we add on top of that the closure of the review, hopefully it will bring improved confidence into Greece,” he said.

“Hopefully it will allow the end of capital controls, or the easing of those.”

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Friday, July 21, 2017

To exit (to borrow from the markets) or not to exit: Greece’s new dilemma

by Theodore Pelagidis

Brookings Institution

July 21, 2017

Athens desperately needs to sell a 3 billion euro, five-year Greek government bond with a yield of around 4.5-4.7 percent as it strives to convince the markets—as well as domestic voters—that the economy is about to recover after eight years of depression and austerity. So, it is willing to pay much more than the 0.89-1.2 percent that the European Stability Mechanism (ESM) is currently charging as part of Greece’s bailout program. Indeed, on July 11, the ESM announced that 7.7 billion out of a total tranche of 8.5 billion euros would flow to the Greek state, of which 6.9 billion euros will cover loan maturities that expire this month. Then, on July 21, the board of the International Monetary Fund approved in principal a conditional loan worth as much as 1.6 billion euros for Greece—just the reassurance requested by many euro-area creditors. Yet Greece’s Gordian knot is far from untied and the most recent conditional acceptance by the fund regarding what amounts to a “precautionary stand-by arrangement” won’t translate to an immediate disbursement.

The urgent need for a “Grexit” to the global borrowing markets’ either amounts to a symbolic government effort to show investors that the economy is recovering or is something political. Despite recent optimism expressed about the likelihood of a Greed re-entry, its timing is far from guaranteed. According to the latest news, the European Commission, the European Central Bank and the IMF—also known as the troika—seem to have reacted by favoring a postponement of a bond issuance by Greece for the next few days, weeks, or even months. But questions remain, as the troika surely knew in advance about the Greek government’s intentions.

The IMF is insisting that Greece’s debt is hugely unsustainable, especially in the long-term. According to the fund, measures either taken or proposed so far by the Europeans, such as the 15-year interest deferral and maturity extension for some of the European Financial Stability Facility/ESM loans, won’t make the country’s debt burden sustainable. The IMF’s July 20 Debt Sustainability Analysis (DSA) just confirmed this view. Greece is not qualified by any standard to exit its program and re-enter the markets. Among other things, such a move would add new debt to the already colossal burden it currently carries, which is equivalent to around 180 percent of GDP. So, even if Greece successfully borrows with a 4.5 percent interest rate, which will make the debt even more unsustainable, mainly by adding to the government’s gross financial needs (GFN).


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Greece Approved for $1.8 Billion Conditional Loan From IMF

by Marcus Bensasson, Viktoria Dendrinou & Andrew Mayeda

Bloomberg

July 21, 2017

The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.

The Washington-based fund said Thursday its executive board approved “in principle” a new loan worth as much as $1.8 billion. The disbursement of funds is contingent on euro-zone countries providing debt relief to Greece.

“As we have said many times, even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners,” IMF Managing Director Christine Lagarde said in a statement. “A debt strategy anchored in more realistic assumptions needs to be agreed. I expect a plan to restore debt sustainability to be agreed soon between Greece and its European partners.”

IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become “explosive” beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.

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Wednesday, July 19, 2017

Yes, Greece Can

by Marcus Ashworth

Bloomberg

July 19, 2017

Greece's hopes of returning to the debt markets after a three-year absence have been held up by one of its main creditors, the International Monetary Fund.

Under the strict conditions of its bailout, the country's debt burden is still too high to contemplate selling more debt, according to the IMF.

But there is a compromise option, which Greece should pursue.

The Hellenic Republic had been laying the groundwork to issue as much as 4 billion euros ($4.6 billion) in five-year bonds after repaying 6 billion euros of its existing debt this week. But the funds to pay down that debt came from the European Stability Mechanism, so Greece's overall debt hasn't been reduced, simply extended.

The IMF's opposition to issuing new debt doesn't stop Greece from shuffling its debt stack by lengthening maturities.

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Tuesday, July 18, 2017

Greece aims to sell bonds for first time since 2014

by Kate Allen & Dan McCrum

Financial Times

July 17, 2017

Greece is looking to sell government bonds for the first time in three years in the latest sign of investor willingness to forget the past problems of former pariah sovereign borrowers.

The southern European nation is expected to sell a five-year bond this week or next, say bankers with knowledge of the plans.

Bond market conditions have steadied since the turbulence of last month when central banks signalled what appeared to be a co-ordinated shift towards monetary tightening, although benchmark yields have continued to tick upwards.

There is a “lot of positive momentum” and “credit markets still feel very healthy”, one banker said. “The market is open for Greece,” said another.

With much eurozone sovereign debt generating negative yields, investors are also on the hunt for paper offering better terms.

Last week an €813m auction of Greek 13-week treasury bills was priced at 2.33 per cent and attracted strong international demand, said the first banker.

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Monday, July 17, 2017

Piraeus Bank Races to Reach ECB Target for Reducing Bad Loans

by Christos Ziotis

Bloomberg

July 17, 2017

The new chief executive officer of Piraeus Bank SA is trying to make up for lost time.

CEO Christos Megalou must offload 4 billion euros ($4.6 billion) in bad loans by the end of the year under a restructuring plan worked out with the European Central Bank’s supervisory arm months before he took over at the largest Greek lender.

"There is a decision of this management to accelerate the implementation of the restructuring plan in order to pay back state aid as soon as possible," Megalou said in an interview at the bank’s headquarters in Athens. Piraeus has received 2.72 billion euros in government funding since November 2015, and Greece’s rescue fund owns more than a quarter of the lender.

Megalou got a late start on the overhaul, joining the bank from Eurobank Ergasias SA only in March after a leadership struggle that makes him the third CEO in less than two years. Two predecessors stepped down in a dispute with Paulson & Co. Inc., one of the lender’s main shareholders.

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Tuesday, July 11, 2017

Greece Should Avoid Tapping Bond Market Too Early, Says Central Bank Chief

by Tom Fairless & Nektaria Stamouli

Wall Street Journal

July 11, 2017

Greece’s central-bank governor said the country has no need to return to bond markets this year, and called on the government to focus instead on privatizations as a way to win investors’ confidence.

“I think it’s a bit early” to tap public markets, Yannis Stournaras said in his first comments on the issue since Greece reached a deal with its international creditors in mid-June.

“I think it would be even better, for instance, if Greece proceeds with two or three emblematic privatizations in the period to come. That would be more helpful to tap markets later,” he said.

The comments indicate a division among top Greek officials over how to get the crisis-struck country back on its feet. Greece’s privatization program, which has repeatedly missed targets set under the country’s bailout, is lately speeding up, despite Greece’s left-wing government initially opposing many of the projects.

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Q&A With Greek Central Bank Chief Yannis Stournaras

by Tom Fairless & Nektaria Stamouli

Wall Street Journal

July 11, 2017

Greece’s central bank Governor Yannis Stournaras suggested the country has no immediate need to return to international markets and said the government should instead focus on proceeding with some big privatizations to win investors’ confidence. He also said the country’s European creditors should specify debt-relief measures or else the country may need another bailout program. Here is an abridged transcript of his conversation with Journal reporters in Athens on Monday.

WSJ: Greece reached an agreement with its creditors in June. What do you think about it—doesn’t it just kick the can down the road again?

Yannis Stournaras: No, I think it is a good agreement. It was long overdue. It will remove uncertainty regarding the payment of Greece’s obligations in July so it is important as such. Of course I would have preferred to have more clarity on debt relief because the expression regarding the extension of maturities of interest payments and amortization from zero to 15 years does not say much and did not allow the [European Central Bank and International Monetary Fund] to work out a debt sustainability analysis. So I hope that soon the Eurogroup will say something more about that and preferably closer to the 15 years.

WSJ: So you don’t think it gave much clarity regarding Greece’s debt?

YS: No it didn’t. It gave a direction, we now know the Eurogroup thinks of extending maturities, interest and amortization payments. And the closer this extension is to 15 years the better. As you may know, in the Bank of Greece we have done a study which shows that at a minimum we need about 8.5 years of weighted-average extension of interest payments to secure debt sustainability. But this is only a minimum, this is at the margin. So I prefer something closer to 15 years that the Eurogroup has included in the statement.

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Greece’s Antismoking Effort Has One Major Problem: Greeks

by Nektaria Stamouli

Wall Street Journal

July 10, 2017

When Katerina Dervenioti decided in 2013 to open a bar in central Athens, she was sure of one thing: there would be no smoking. She had always disliked it, and after all the government had passed a law banning smoking in interiors back in 2009.

It took only a few hours after opening her cafe in a trendy Athens neighborhood to be sure of a second thing: Greeks believe rules are meant to be broken.

Despite the law, patrons at her vintage-inspired spot lighted up without a thought. She removed ashtrays, added signs and spoke to customers directly, but it was futile. Customers now smoke all they want, she said, starting early in the morning with coffee and ending late at night with a cocktail.

In Greece, star athletes celebrate championships with cigarettes dangling from their lips—star center Ioannis Bourousis of the Panathinaikos basketball team was seen toking on a cigar at a bouzouki bar after a big win in June.

Taxi drivers smoke while driving, holding their cigarettes out an open window only when they have passengers.

On a recent visit by Amin Mohamed to the local municipality office to take care of paperwork for his dry-cleaning business, the smoke was so thick that he finally asked the employee there to put out his cigarette. The employee simply opened a window and kept on smoking, he said.

“Nothing will ever change,” Mr. Mohamed said.

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Friday, July 7, 2017

UN Says Current Talks to Reunify Cyprus End Without Agreement

by Paul Tugwell & Georgios Georgiou

Bloomberg

July 7, 2017

Efforts of the past 10 days to reach a landmark deal to end over four decades of division on the eastern Mediterranean island of Cyprus ended without agreement, United Nations Secretary General Antonio Guterres said.

Despite the strong commitment and engagement of the Greek and Turkish Cypriot delegations, Greece, Turkey, the U.K. and the European Union as an observer, “I am deeply sorry to inform you that the conference on Cyprus was closed without an agreement being reached,” Guterres told reporters early Friday in the Swiss resort of Crans Montana.

Cyprus has been divided since 1974, when Turkey invaded the north to protect the Turkish Cypriot minority against a coup to unite the island with Greece. It went on to take more territory and thousands of people were displaced. An agreement to stitch Cyprus back together would draw a line under one of the world’s biggest diplomatic challenges.

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Wednesday, July 5, 2017

Greece Has Eliminated Its Trade Deficit, But at a High Cost

by Colombe Ladreit de Lacharrière & Melina Kolb

Peterson Institute for International Economics

July 5, 2017


Greece has erased what used to be a very large current account deficit between 2007 and 2016. This would appear to be good news, but it is not. The reason is that the deficit was reduced by Greece cutting back on imports, not on boosting exports, a result of a dramatic drop in economic output.

A reduction of the trade deficit through a decrease in imports is usually welcome when high imports reflect an unsustainable boom. Greece's output gap, a measure of how much an economy is operating above or below its optimal level, was 8.9 percent in 2007 based on the latest data from the Organization for Economic Cooperation and Development (OECD). Ideally, Greece would have eased the output gap to zero percent and lowered imports in the process. Instead, economic output collapsed to a level far below potential, with the gap reaching –11.8 percent in 2016.

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Thursday, June 29, 2017

Greek trash collectors back to work after 2-week protest

Associated Press
June 29, 2017

Greek municipal garbage collectors on Thursday decided to return to work after nearly two weeks of protests that left mounds of uncollected refuse in the streets amid a heatwave.

The municipal workers’ union, which wants employees on fixed-time contracts to be granted full-time jobs, said rubbish collection trucks would hit the streets beginning at midnight Thursday.

The decision came two days after unionists rejected a compromise proposed by Prime Minister Alexis Tsipras that would see workers’ contracts renewed for several months until full-time hirings are arranged.

The leftist government had initially pledged permanent jobs for long-term contract workers, but it faced tight budget obligations under Greece’s international bailout agreements.

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Greece Gets Investor Thumbs Up on Possible Return to Bond Market

by Sotiris Nikas & Anchalee Worrachate

Bloomberg

June 29, 2017

If Greece returns to the bond market this year, Mark Dowding would be a buyer.

“We have been bullish on Greece over the past year or so,” said the partner and portfolio manager at BlueBay Asset Management in London, which owns some long-dated Greek bonds. “We’ve also formed the view that lenders would remain committed to helping Greece. I feel relatively confident that Greece will be returning to market in the second half of this year.”

The change in sentiment toward Greece -- the epicenter of the European financial crisis -- is reflected in the fact that country’s bond yields are the lowest since before the turmoil even as the debt remains deep in junk territory. Adding to investor confidence, Greece’s euro-area creditors agreed to release 8.5 billion euros ($9.5 billion) in new loans on June 15 even as they postponed until mid-2018 a binding decision on what measures they will provide to ease the country’s burden.

Although Athens has not definitively said it will be selling bonds this year, many in Prime Minister Alexis Tsipras’s administration say the question is not if but when. A successful second bailout review, an improved economy and greater support from euro-area partners may embolden Greece to consider a return to the market for the first time since 2014. All indications are that yield-hungry investors would welcome new Greek paper even though the country isn’t part of the European Central Bank’s quantitative-easing program.

Tuesday, June 27, 2017

The IMF’s New Role in Greece Proves Its Value for Europe and the United States

by Anna Gelpern

Peterson Institute for International Economics

June 27, 2017

Greece’s economic problems are far from solved, but the International Monetary Fund (IMF) deserves part of the credit for the glimmers of progress on official debt relief in the Eurogroup announcement on June 15. The IMF is expected to issue its “approval in principle” for Greek policy commitments under the European Stability Mechanism (ESM) program, but it will not contribute money until it gets more comfort on debt relief from European governments and institutions. On balance, this makes the IMF a force for good in Greece and in Europe. The Fund’s hard line may be an effort to compensate for past missteps; now it is doing the right thing. It should remain engaged in Europe, and the United States should support its engagement as an independent source of policy expertise and funding.

Europe wants the IMF involved in Greece primarily for political reasons. Its presence can validate the policy and financing package, and commit both sides to perform. The Fund’s reputational capital is pledged to the notion that Greece will recover if the government and its euro area creditors do as they say they will. The IMF has not lent to Greece since 2015. It would be a small part of the financing if it got back in. Paradoxically, the IMF has become more influential as its financial contribution to Greece has diminished. This is an achievement to build on in Europe and beyond.

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Monday, June 26, 2017

Cyprus rivals restart talks over reuniting island

by Arthur Beesley & Kerin Hope

Financial Times

June 26, 2017

Cypriot leaders are set for fresh talks to try to reunite the Mediterranean island in spite of sharp differences over new security and political arrangements.

The UN-brokered talks in Switzerland aim to settle decades of ethnic division between the Greek Cypriot and Turkish Cypriot communities.

Security remains the most serious barrier to a deal between Nicos Anastasiades, the Greek Cypriot president, and Mustafa Akinci, the Turkish Cypriot leader.

Cyprus has been split since 1974, when Turkey invaded and occupied its northern third in response to an Athens-inspired coup aimed at uniting the island with Greece. A UN buffer zone divides the Greek-Cypriot state, an EU member, from the breakaway Turkish-Cypriot state, which is recognised only by Ankara.

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Saturday, June 24, 2017

The startup culture battling the Greek brain drain

by Yannis Palaiologos

Irish Times

June 24, 2017

Greece has been in crisis now for a decade. Since sliding into recession in 2008, it has seen its annual output collapse by about a quarter. Its unemployment rate has been above 20 per cent for more than five years. Close to a half a million Greeks, mostly those with the best education and career prospects, have left the country to seek their fortunes elsewhere.

There have been few rays of hope to cling to in this dark period. One of them has been the steady emergence of the Greek start-up ecosystem. In the years since four EU-backed venture capital funds started operating in early 2013, there have been notable successes, including multimillion dollar investment rounds and buyouts by major global companies.

One active player in the Greek start-up scene has been Stavros Messinis, founder of CoLab, a co-working space in Athens, in 2009 and, in 2013, another space known as the Cube.

“We’re currently hosting around 20 companies. They are mainly software tech companies but we have one or two hardware companies, a software agency and even a company that makes trendy handbags,” Messinis says.

“We offer them facilities to work from, mentoring and other services such as legal and accounting. The fact that they’re together in a shared office means they help each other out.”

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