IMF, ECB leave doubts over Greek return to bond markets

The International Monetary Fund’s Executive Board was due to approve the organization’s participation in the Greek program “in principle” late Thursday but doubts persisted about when Athens might be able to return to the bond markets.

Ahead of the IMF board meeting, it emerged in a report by The Wall Street Journal that as part of its deal with the Fund, Greece has agreed not to hold more than 325 billion euros in central government debt. This would prevent Greece from issuing any new debt. It would only be able to rollover existing debt.

It appears that the government had been considering swapping a five-year bond issued in 2014 with a new note maturing in 2022 but maybe also raising a small amount on top of the previous issue.

Earlier, during a scheduled press conference in Frankfurt, European Central Bank President Mario Draghi said it was up to the Greek government to decide when it should return to the bond markets, but suggested that Athens should avoid rushing back and that any trial bond issue should be part of a broader strategy to regain market access.

“Issuance activity should be part of an overall strategy where you have the completion of the third [bailout] program, and also the return to the market should be in a lasting way,” he said in a comment that seems to support the position taken by Bank of Greece Governor Yannis Stournaras.

The head of Greece’s central bank told The Wall Street Journal last week that he thinks it is too early for a bond issue now and that the government would be better off proceeding with some significant privatizations to build confidence from investors.

“The sound implementation of the program and credibility are essential, however, for restoring market confidence, and we have to take note that the national central bank has expressed some concern about that; although there has been serious progress in place in Greece throughout the last several months,” Draghi told reporters Thursday.

Earlier, government spokesman Dimitris Tzanakopoulos insisted that the coalition wants any bond issue to contribute to the effort to exit the program next August.

“The government’s decision is related to… a comprehensive strategy and preparation to ensure that in August 2018 we will have regained market access,” he said, adding that this would determine when Greece tries to issue its first bond since 2014.