The present note assesses the economic and market significance of the new Hellenic Republic 5-year bond issue, focusing on its potential implications for the evolution of the public borrowing requirement under the current macroeconomic scenario.
The note presents a detailed analysis of the future general government borrowing needs and sources of funding and explains why the utilization of internal sources, a new debt relief package from the official sector and some future bond issuance can eliminate any projected financing gaps up to year 2020.
In fact, our analysis suggests that the government borrowing requirement now appears broadly manageable until 2022/23, but becomes more challenging thereafter, mainly due to: a) the expiration of the 10-year grace period on principal payments on EU loans provided under both the first and the second economic adjustment programs; b) the expiration of the 10-year grace on interest payments on EFSF loans; and c) maturing post-PSI market debt. To a large extent, we expect this issue to be addressed in the context of a new debt relief package for Greece from the official sector, expected later in the current year.
This note presents the (hypothetical) structure of such a package, involving lower interest rates and extended maturities of EA bilateral loans disbursed under the first bailout program (GLF). Our analysis shows that this structure can both facilitate the fulfillment of the debt ratio targets agreed at the November 2012 Eurogroup and improve the manageability of the government borrowing requirement on a multi-decade basis.
Viewers can log on herebelow and read the entire analysis: GREECE MACRO FOCUS, April 15, 2014 – 5Y Bond issue (3)