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Greece returns to bond markets with a bang - ASHARQ AL-AWSAT English Archive 2005 -2017
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Police search for evidence at the entrance to the Bank of Greece after a booby-trapped car exploded there on April 10, 2014 in Athens. (AFP Photo/Louisa Gouliamaki)

Police search for evidence at the entrance to the Bank of Greece after a booby-trapped car exploded there on April 10, 2014 in Athens. (AFP Photo/Louisa Gouliamaki)

Athens, AP—Buoyant Greek officials hailed the country’s return to the international debt market after four years as an overwhelming success on Thursday, with investors snapping up the five-year bond in a sale that was eight times oversubscribed.

The finance ministry said it had raised 3 billion euros (4.14 billion US dollars) with a 4.75 percent coupon—a lower borrowing rate than the 5 percent initially hoped for.

The sale is a milestone for Greece. It has been locked out of the markets since it nearly went bankrupt in 2010, when its borrowing rates spiked upon the revelation that its public debt was much larger than previously estimated.

“It seems that the world community now trusts Greece once more,” Finance Minister Yannis Stournaras said. “We had a very big success today.”

Greece has been relying on funds from international bailouts since May 2010—in return for which it has imposed a series of deeply unpopular spending cuts and tax hikes.

The dissatisfaction has led to frequent strikes and often violent demonstrations.

Hours before the bond issue, a car bomb exploded in central Athens before dawn outside a Bank of Greece building, causing damage but no injuries. Anti-terrorist police were investigating the attack, for which there was no immediate claim of responsibility.

The bombing—and the bond issue—came the day before German Chancellor Angela Merkel was expected in Athens on a brief visit to meet with Prime Minister Antonis Samaras.

Government spokesman Simos Kedikoglou accused the bombers of trying to detract from Greece’s success.

“The evident target of the attackers is to change this image, and change the agenda,” he said. “We will not allow the attackers to achieve their aim.”

The European Commission, the EU’s executive arm, hailed the country’s return to the bond market, but cautioned against complacency.

“Today’s successful bond issuance is a first but clear step in restoring market access for Greece,” said European Commission Vice-President Siim Kallas in Brussels. “However, it should also be a reason to stay the course of reforms and strengthen the recovery underway.”

Greece had initially sought to raise 2.5 billion euros (3.5 billion dollars), but got offers of about 20 billion euros (28 billion dollars). Nearly 90 percent of the sale was to international investors.

The success was possible thanks to a fall in Greece’s borrowing rates in recent months as public finances improved following years of painful austerity measures.

However, ratings agencies still consider Greek bonds to be far from investment grade, giving them a junk status. The country has not committed to regular auctions of long-term debt, and still draws funds from its bailout from the International Monetary Fund and other Eurozone countries, which expires at the end of this year.

Economists at prominent think tanks in Germany cautioned against reading too much into the auction’s success, noting that investors were likely cheered by the fact a further writedown on Greece’s debt looks unlikely. Private investors holding Greek government bonds suffered losses of about 75 percent during a debt reduction scheme in 2012.

“Against this background, I wouldn’t overestimate this success, which is certainly very pleasing,” said Ferdinand Fichtner of the German Institute for Economic Research. “I think what is more important is that the political situation in Greece . . . proves to be stable—that, I think, is what in the medium to long term will restore the confidence of capital markets.”

The efforts to heal public finances have come at a high cost for society. Greece has seen its unemployment rate skyrocket and a quarter of its economy wiped out.

But there was some—if small—improvement on that front, too. Figures released Thursday showed the unemployment rate dipped to 26.7 percent in January from 27.2 percent in December in seasonally adjusted terms. It was the fourth consecutive monthly drop.