Greece can emit 50-year bonds under European pressure

Government BondsGreece announced that it was examining technical issues relating to the issuance of 50 -year bonds to further restructuring of its debt and make it more sustainable. This surprised many, since the country has no access to global capital markets in 2010, but powerful interests can make this happen. Recently, Finance Minister of Greece Ioannis Sturnaras said: “I hope that we will have 50-year bond. This means that our debt will be significantly reduced along for 50 years”. In 2013, Greece will have a gross public debt of around 322 billion euros, or more than 175% of GDP, which is anything but not controlled. The country may need another injection of 10 billion euros to finance between mid- 2014 and end of 2016.
The idea of ​​Greek debt to be sustainable by 2022 stopped the Greek parliamentary Supervisor’s budget through a rare recognition. They say: “It is unrealistic to believe that Greece will be able to return to financial markets as early as 2014 and that debt will require further cut to be sustainable”. Greece received 240 billion EUR in rescue two tranches. Country seeks ways to replace and increase the duration of bilateral loans worth between 53 billion to 110 billion EUR of 50-year bonds. Of course, such a move would be directed against the partial derecognition because the mere extension of bilateral loans and lower interest rates will not be sufficient to public debt repayable. The local population has reached the bottom and can not tolerate or pay more taxes, nor to accept future reductions in salaries and pensions as conditions recently tagged IMF chief Christine Lagarde.
Greece will need more time and more suitable conditions to pay even loans worth 130 billion EUR disbursed by the European Financial Stability Facility. Repayment of loans to the temporary rescue mechanism should start in 2025. But the 50-year bonds issued to cover these payments have better financial sense and are more favorable for the debt-ridden country. The Gurus in the markets for financial instruments with fixed income believe that the idea of ​​issuing 50 -year bonds gives false hopes of the country besieged by Europe, but believe there is an obvious way out of this madhouse. Measures to be relieved of the debt will be discussed in the second quarter of 2014 and will include the issuance of bonds with such a long period. Sometimes when an ambitious and difficult decision is the least evil of your creditors, they could hardly realize it, to avoid the partial write-off of debt.
In today’s world we see “black swans” weekly issue of bonds, more and more will help avoid hell, which will cause a partial write-off. Athens say that the chance of something like this happening is very small, although significant doubt on some of the market participants. The first thing the government hopes to achieve is two of the four large systemically important banks, which bear the burden of the same rating scale, as they have Greek bonds, to enter the capital markets, especially when recently learned about the interests of hedge funds to their highly undervalued stocks. The Finance Minister hopes that Eurostat in April 2014 reported the first surplus in the country. Sturnaras even hopes budget figure to surpass analysts’ expectations of 340 million EUR. Theoretically then, the Greek government will issue 5-year bonds for 3 billion EUR with which to hit the market after almost 5 years of silence. If this happens, then there will be fewer and fewer obstacles to the issuance of 50-year long-term bonds worth at least 55 billion with which to pay their debts to the European Financial Stability Facility. This will bring smiles to the faces of all Eurozone countries that have moved more than his weight from Greece to the global players. Obviously there will be considerable pressure on the ECB and on the central banks of the Eurozone countries to participate in the issue, because they have the irrevocable right to avoid partial relief. Moreover – the governments of the Eurozone will also pressed their largest banks to participate in order to increase the opportunities for comprehensive coverage of this type of issue. While a forthcoming issue of 50 -year bonds will be the magic wand for the sustainability of Greek debt, it is more than false hopes to improve the debt profile of the nation. In addition, it may actually be a good bet for intelligent market participants who realize that the Mediterranean country has its opportunities – such as heavy deposits of resources oversaturated housing market and undervalued companies.
Not yet fully derecognised unlikely Greece to issue 50 -year bonds. There are powerful vested interests who will benefit from the issue and will make sure that it will work.

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