May appears ideal for Greece to return to the bond markets

The recent decline in Greek bond yields and the positive results of the Greek banks’ stress tests have opened a window of opportunity for the government to return to the markets, in accordance with its narrative of a “clean exit” from the bailout program in August.

While the clearest signal for foreign portfolios would be a decision on the easing of Greece’s debt that would bolster investor confidence in Greece, analysts and economists have told Kathimerini this should not be expected anytime soon. Nevertheless the government is still keen on a new bond issue, as such a move “would not be a bad idea.”

Eurasia Group chief analyst for Europe Mujtaba Rahman told Kathimerini that the Greek government ought to make the most of the positive mood the Greek banks’ stress tests will generate so it can tap the markets again, as the future may be more uncertain.

“Straight after the stress tests, and during May, may be the best moment for Greece to tap the markets, as the medium term may hold a number of challenges, given the concerns over growth in the eurozone, the strengthening of protectionism and the tightening of monetary conditions,” Rahman said.

He went on to note that “Eurasia’s baseline scenario is that there is no chance for Greece to follow the road of the precautionary credit line after the end of the program, but will find itself in a period of ‘enhanced monitoring’ that will allow the Europeans to follow things from a distance.”

The government is relying on the markets to create a sufficient cash buffer that will cover its funding needs after the end of the program in August so it can avoid the option of a credit line.

According to Barclays economist Francois Cabau, Greece will be able to emerge from its third bailout without any further official financial assistance. He estimates the country will return to the markets, so as to end its program with sufficient cash to cover its financing needs by end-2019, with the cash buffer possibly reaching up to 20 billion euros.

He did note, however, that Greece cannot proceed “independently” after August, without any terms or conditions, and that it will be hard to maintain primary surpluses of 3.5 percent of the gross domestic product every year up to 2022.