Moving to show it has overcome the worst of its financial troubles, Greece issued bonds on global financial markets on Tuesday for the first time in years, in an offering that institutional investors eagerly snapped up.
The sale of five-year bonds, which raised 3 billion euros, or $3.5 billion, was intended to show that Greece may be able to stand on its own two feet again when its current international bailout, worth €86 billion, expires in August 2018.
The European Union and the International Monetary Fund have had to support Greece with a staggering €326 billion in financial lifelines since 2010, when Athens was shut off from borrowing in global markets during Europe’s financial crisis.
Greek and European officials hailed the bond sale on Tuesday as a milestone for a troubled country that nearly left the euro twice since the crisis began, threatening to break up the currency union.
The government now plans to issue bonds at least twice more before August 2018. If those are successful, it could be a turning point for Greece and signal a less volatile future for the eurozone, which is at last enjoying a broad economic recovery.
A jubilant Prime Minister Alexis Tsipras said that the debt sale signaled Greece was on the path to a definitive end to its crisis. It was “the most important message and the most significant step in order to finish this unpleasant adventure of the memorandum,” he said on Greek television, referring to the country’s bailouts, which carried harsh austerity requirements.
Now, he said, it was time to discuss “the future of Greece.”
The bonds issued Tuesday have a return of about 4.625 percent, well below the borrowing costs investors demanded of the Greek government at the height of its debt crisis. But the yield — markedly higher than those for bonds from other major European countries — was a reflection nonetheless of the continued risks present in Greece’s finances and the economy.
The deal included an offer for investors holding Greek bonds falling due in 2019 to switch them for bonds that the government would pay back in five years, in 2022. Of the €3 billion in five-year bonds that Greece raised Tuesday, around half was new money; the rest was rolled over from the 2019 bond.
More than 200 official offers worth a total of €6.5 billion were made, the government said, indicating a high level of demand. A majority of those offers came from “real investors of a global caliber, not profiteering funds,” it said in a reference to investors who seek high returns on risky bets.
Pierre Moscovici, the European commissioner of economic and monetary affairs, who appeared with Mr. Tsipras on Greek television, said, “Confidence in Greece is really coming back.”
But he added that Greek authorities “need to keep on pedaling” by making changes to restructure the economy, as required under the bailouts.
Those lifelines came with harsh austerity conditions, including a substantial reduction in state spending and higher taxes that even the IMF has acknowledged damaged Greece’s already moribund economy and exacted a heavy cost on Greek society. Pensions have been slashed nearly in half in the last seven years, while hundreds of thousands of jobs have been lost, draining income from most households.
Yet successive Greek governments have also dragged their feet on making changes that would boost the economy, including shrinking the bloated official payroll, cutting rampant corruption between privileged businessmen and the state, and, most dauntingly, improving tax collection among a population that has a history of evading taxes.
While bond sales are good news for the government, Greece’s creditors are concerned that it may use them as an excuse to backslide on politically painful changes as its bailouts approach an end.
Nor are the creditors ready to give the government more relief from its mountain of debt. Germany, one of Greece’s biggest creditors, has cited the government’s poor record on carrying out changes as a reason not to do more.
Germany itself made a profit to the tune of €1.34 billion on loans and bonds purchased to support Greece in the last seven years, according to a report in the German daily newspaper Süddeutsche Zeitung.