Greece made an impressive return to the global capital markets after a four-year absence yesterday, with Athens raising €3bn (£2.5bn) in an offering of five-year bonds at a surprisingly low interest rate of 4.95 per cent.
It is a remarkable turnaround for a country that was shut out of the bond markets in March 2010 and had to be rescued by its eurozone neighbours and the International Monetary Fund. As recently as 2012 Greece seemed to be on the verge of crashing out of the single currency as plummeting demand, soaring unemployment and political turmoil gripped the country. Greek 10-year bond yields hit a peak of 36 per cent in December of that year as investors priced in a default.
Despite Greece's private bond holders suffering an enforced haircut in 2012 Athen's bond yields have since fallen back dramatically, along with the borrowing costs of the rest of the eurozone's strugglers, and were trading at about 5.9 per cent yesterday.
Greek politicians hailed the successful bond auction yesterday as a sign its shattered economy is finally returning to health. "Today, Greece took one more decisive step to exit the crisis," Antonis Samaras, the Prime Minister, said in a televised address. "Confidence in our country was confirmed by the most objective judge – the markets."
The IMF also praised the auction. "We welcome this," said Poul Thomsen, the Fund's mission chief in Greece. "It's a fundamental objective of the programme to bring Greece back to market and this is an important milestone in this regard that clearly speaks to the success of the programme."
The Athens government achieved a primary budget surplus in 2013 and the government has squeezed down the current account deficit, which hit 17 per cent in 2007, to 2 per cent. However, this has been achieved by crushing demand in the economy. GDP has contracted 23 per cent since 2008 and has still not returned to growth. Unemployment remains at 27 per cent. Athens' government debt is 177 per cent of GDP, still regarded by many analysts as unsustainable. And in a reflection of the continuing political tension in Greece a car bomb was set off yesterday morning outside one of the central banks' offices in Athens, although no one was injured in the explosion.
The bond offer was oversubscribed, attracting bids exceeding €20bn from more than 550 investors; 85 per cent of Greek debt is in the hands of the EU and the IMF while private creditors hold the balance.