Daily Management Review

As Athens Considers Return To Bond Market, A Third Of Greeks At Risk Of Poverty


07/23/2017




As Athens Considers Return To Bond Market, A Third Of Greeks At Risk Of Poverty
Analysts say that there are many structural problems that have yet to be resolved to make the Greek economy more sustainable even as the government might be preparing to return to the bond market.
 
A third financial program since 2010 is being run Greece at the moment which should end next year. "It still doesn't seem we are particularly far down the road in solving the structural issues of Greece" despite the reforms implemented until now, according to James Athey, fixed income investment manager at Aberdeen Asset Management.
 
"Until the Greek economy has got a business model which works and it's productive and it's creating stable, secure growth that it's not reliant on debt relief, external support and constantly bailouts from the Europeans, then it's difficult to believe that the path is towards something more healthy rather than something less healthy," Athey said in a TV interview.
 
The International Monetary Fund has warned that the country will have to continue reforming in order to receive that money even as the agency agreed on Thursday to make a loan of $1.8 billion to Greece as part of its current bailout program.
 
The fund said that Greece has extend labour market reform to liberalize Sunday trade and allow for collective dismissals and has to continue focusing on reducing the level of bad loans in its financial sector.
 
In order to show the rescue has been successful and the economy is able to fund itself, Greece wants to come back to bond markets with the bailout program due to end in 2018.
 
When and how such a comeback will be more appropriate is being studied by the government. It is widely expected that Greece will issue bonds next week even though Athens refuses to comment on this issue.
 
Given that Greek government bonds do not qualify for the European Central Bank’s asset purchase program, the move is somewhat confusing. They cannot feature on the central bank's balance sheet because they are considered junk by credit rating agencies.
 
Athey said: "I don't know", when asked how Greece would convince investors to buy bonds if the ECB isn't buying these assets.
 
"I guess from a Greek perspective it seems to be a window of opportunity, we've seen Greek yields have fallen fairly consistently throughout the year…the fact that Greece might come to market at what optically looks like an attractive yield for a Greek issuer must be tempting to them, especially considering that we are expecting QE (quantitative easing) program to ultimately come to a conclusion over the next 6 to 12 months, they certainly would not want to wait until then," he suggested.
 
Greece's market return is a strategic move and the markets know it, said Michael Bapis, managing director of the wealth management group Bapis.
 
"Greece should have gained market access and be able to finance itself before its current bailout ends to avoid another loan agreement, they do not want to go too early but when they do go they want to ensure that the markets know that this is a strategic move," Bapis said.
 
Investing in Greece "with cautious optimism" was suggested by Bapis, who's a Greek-American citizen managing about $1 billion of assets.
 
"Although the economy is improving, more than a third of Greeks are estimated to be at risk of poverty," he said.
 
(Source:www.cnbc.com) 






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