Just a few short years ago, Greece was at the center of the financial world in a bad way with a stunning economic collapse. But on Tuesday, investors seem to have forgotten all about Greece’s financial crisis and subsequent bailout, and lined up to buy billions in bonds from the recovering European nation. Or are these buyers just over eager?
Is the Financial Crisis in Greece Really Over?
There was a lot of good and a little bad for Greece as the country offered up and sold $3.5 billion in 5 year bonds. For example, Greece actually had to turn away investors, with demand sitting at about $7 billion for the bond sale. And since demand was high, Greece was able to offer the debt at a lower rate than the initial guidance given by the Greek government. But Greece also had to offer a lot of incentives with the sale.
About half of all the bond purchasers were already owners of existing Greek debt that was set to mature in 2019. The Greek government convinced these investors to exchange their bonds for 2022 bonds by promising an additional $46m payout. Greece is clearly betting on itself to right the ship and be back in good standing in the next 5 years.
Now the question is, can they do it?
Economic recovery here is definitely a very real possibility. The Greek GDP is growing, the economy is improving, and there is significantly more increased increased fiscal transparency. This should keep the country from falling into the same financial mistakes Greece has made in the past.
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On top of that, bankers kept the deal size smaller than demand. This did two things
Kept the price higher to bring in more money off a smaller amount of debt
Allows the Greek government to come back and offer another bond sale more often in the coming months, ensuring demand continues to stay high.
Learn about Greece’s financial crisis by watching this video from BA Talks:
On the other hand, there’s also a very real possibility of another power struggle between Greece’s creditors over that debt. If that happens, the government goes into upheaval and another crisis looms large. However, given the danger that presents to a slowly recovering country and its people, things are looking good for Greece, even if they’re not completely out of trouble just yet. Greek bonds are a safe bet.
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