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July 26, 2017

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Successful bond issue, what next?

Greece sold €3bn of a 5-year bonds yesterday, at 4.625%. With this rate Alexis Tsipras achieved one of his targets: to get a better yield than the 4.95% his predecessor Antonis Samaras achieved when he tried the markets in 2014 - which tells us a lot about the shallowness of the Greek government's economic strategy. Government officials hailed the 32bp improvement as a sign that market confidence has returned. The FT argues that the yield on the new bond is less impressive than it seems, given the negative yield on German 5-year debt. The yield is still 3.9 times higher than Portugal's, and there was less interest in the bond sale than in 2014. According to Reuters, €6.5bn in orders by 200 investors have been placed, compared with €20bn by 600 investors back in 2014. About half of the interest came from existing investors who swapped their bonds maturing in 2019.

But there is no doubt that Greece will now get a boost from this successful bond issue, as it goes hand in hand with improved GDP growth data for the first quarter, and as the country prepares to exit the programme next year. Euclid Tsakalotos promised another two bond issues before the end of the programme. 

The reaction in the press was predictable: proudly celebrated by the Greek government at home, and cautious optimism among European officials, notably Pierre Moscovici and Wolfgang Schäuble who tempered their endorsements by saying that reforms still need to be implemented and a third review is yet to follow. 

At home, meanwhile, a confrontation with the judicial system seems to go from bad to worse. In a rare step Council of State President Nikos Sakellariou went on TV saying that he fears the country is facing a constitutional crisis as a result of repeated criticism of judicial decisions from members of the government regarding a series of court verdicts. President Prokopis Pavlopoulos and opposition leader Kyriakos Mitsotakis made reference to the separation of powers being fundamental for a functioning democracy. On this issue there is no comment from Brussels. The government accused part of the judiciary of issuing "political" judgements, and regularly comments on judges and judgements with strong words. The spat may serve Syriza to rally its left-wing supporters, but it is risky, as a institutional crisis could undermine the economic recovery narrative Alexis Tsipras is building up, warns Macropolis

Our other stories

We also have stories on whether Martin Schulz has blown it; on the extent to which the housing benefit cuts have exposed Macron's weakness; on the losses to be incurred by Novo Banco’s investors; on the politics of a Swedish data leak; and on what it would take for the eurozone periphery to be sustainable.

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