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Greece took a symbolic first step in its return to international capital markets on Wednesday formally announcing its intention to issue a five-year bond "shortly" for first time since the start of the debt crisis which led the country at the brink of default four years ago and into the EU/International Monetary Fund mechanism.
Amidst an initial festive atmosphere among state officials and several market analysts over the benefits of the development and strong criticism over the effort and its outcome by opposition parties and other experts, both sides seem to converge at the view that the path to eventual full recovery which lies ahead is still long.
The official announcement by the Greek Finance Ministry on Wednesday afternoon did not clarify when the bonds will be sold and what will be the size of the issue notes auction.
According to ministry sources on Wednesday evening, the initial target of funds to be raised stands at 2.5 billion euros (3.46 billion U.S. dollars), it could be increased according to demand and the process starts on Thursday morning.
The amount which the government sources said will be used for growth- enhancing policies seems like a drop in the ocean compared to the country's financing needs and its sovereign debt burden still stands at about 177 percent ration of its GDP after four years of harsh austerity which has dramatically altered the daily life of Greek peoples.
A similar amount is raised on a monthly basis under a regular auction program of short-term treasury bills throughout the crisis. In addition, the multi-billion-euro loan installments under bailout deals come at approximately 2.5 percent interest rate compared to the about 5-5.5 percent expected that Greece will secure in the upcoming longer-term bond sale.
The gap fuelled criticism that Greece will pay a higher borrowing cost. The Finance Ministry officials speaking anonymously on Wednesday evening dismissed claims that the new bond issuance will only add to Greece's debt burden. They insisted that despite the difference in interest rates in the long-term, according to their estimates, Greece on the contrary will have a 200-million-euro per year benefit from the issuance.
The major significance of the initiative is that it reaffirms that Greece's battered credibility is being restored and that international markets acknowledge the stability achieved via a painful fiscal adjustment and structural reforms drive, opening a new chapter for the country, analysts in Athens noted.
The result of the first issuance of longer-term bonds is a turning point and it is expected to determine the next steps; the issuance of state bonds in coming months and the gradual full return of the country to international capital markets - from which it was shut out in 2010 - through a regular long term bond auction program.
Greece's return to international markets is due to have a positive effect on the economy by strengthening investment interest in the local stock market and by improving the liquidity of the local banking system and subsequently of Greek enterprises and households on better terms to the benefit of the real economy.
Manos Papathanassiou of Solidus investment advisory firm forecast that "from now on Greek enterprises will have a better access to funding from foreigners on improved interest rates."
Greek banking system officials expect a similar improved pattern for the average Greek citizen in the next phase which is expected to give breathing space also to the crumbling real estate market.
Thomas Ziogis of real estate investment advisory company NAI noted that "the bond market is seen a reference point for investments in other sectors of an economy and a measure for comparison for investments in the real estate properties sector."
Other financial analysts are more cautious and stress that the picture will not change overnight, since great challenges remain to be resolved.
For Petros Leotsakos, the "exit to markets will not magically resolve all problems, as long as there is still a question whether the sovereign debt is viable and as long as about 75 percent of Greece's debt is still held by other countries rather than private sector investors. The road forward is still long and rocky."
The potential of political instability after May's elections for the euro parliament and local administration amidst voters' disappointment with the pains of austerity is seen as a key risk factor which could undermine Greece's impressive comeback.
Opposition Left parties leading members, unionists and workers on the streets of Athens who took part in the latest protest rally during Wednesday's new general strike gave an icy cold welcome to the announcement.
The return to international capital markets still does not help the most recession-stricken Greeks enter the markets of their neighborhoods to cover their basic needs, they argued.
They pointed to record high unemployment rates of some 28 percent of the working force and increasing poverty rates, as the income of the average Greek household has shrank by approximately 30 percent in four years.
For most Greeks it will take several years before they feel any substantial change given the extent of the shocks in recent years after rounds of cuts on wages and pensions, tax hikes and mass layoffs, they argued.
Proponents and critics of the step alike agreed that the only way forward for the country is to focus on restoring sustainable development. Despite progress on the fiscal adjustment front, the structural reforms agenda remains incomplete and chronic malfunctions and plagues of Greek economy, such as tax evasion and corruption still need to be fully addressed.
The sacrifices and efforts of recent years are bearing fruits, the signs of financial recovery are increasing, but the road to full rebound still seems long.
