Euro-area events will affect Greek return to markets

Subject

Market sentiment towards Greece.

Significance

Bonds issued recently by the Hellenic Telecommunications Organisation (OTE) are part of a concerted government effort to regain access to the markets on a sustainable basis, as the country prepares to exit its bailout programme on August 20. While last month’s deal between Athens and its creditors to extend repayment deadlines on nearly 100 billion euros (117 billion dollars) of bailout loans has buoyed investor confidence, the illiquidity of Greece’s debt market, coupled with a plethora of economic and financial vulnerabilities, will make it difficult to sustain access to markets.

Impacts

• Greece’s cash reserves of 22 billion euros should be sufficient to cover the country’s financing needs for the next two years.
• Outflows from European equity funds are being fuelled by concerns about Italy’s commitment to the euro-area and the recent growth slowdown.
• The leading gauge of banking shares in Europe, the Stoxx Europe 600 banks index, is at its lowest level since December 2016.