Earlier this week the EU announced it was holding back the next phase of Greece’s debt relief as the government had so far failed to fully implement reforms that it had promised during the huge bailout that ended in August last year. As part of the debt relief scheme, Greece was due to receive approximately EUR1bn, however, according to the EU, the Greek government has so far not completed new housing insolvency rules for those threatened families with foreclosure on their homes. Pierre Moscovici, the EU Economics Affairs Commissioner said ‘It's too early to decide formally on the disbursement today’ adding ‘The signal given to the markets is decisive, the message of today's Eurogroup will be and must be positive’. The EU appears keen to downplay the announcement somewhat, not wanting to open up old wounds of the Eurozone debt crisis.
Under the debt relief scheme agreed with the EU last year, Greece was to receive profits that Eurozone central banks have made on their Greek bond portfolios plus the revenue made from waiving the step up margin on some Eurozone loans. However, the money can only be granted if Greece delivers on all its promised reforms with no backtracking. According to the EU, so far the Mediterranean country has completed 13 out of the 16 promised reforms. ‘If all reform commitments are met, the Euro group will in April consider the implementation of further debt relief measures’ Mario Centeno, the head of Eurozone finance ministers, told a news conference, adding ‘There are still a couple of points where details need to be fleshed out. The main outstanding issue is a potential new scheme for the protection of primary residences’.
This news comes only days after Greece’s first 10-year bond issue for nearly 10 years. The EUR2.5bn issue yield was set at 3.9% with a 3.875% coupon, with the total book size of nearly EUR12bn. Although this was the first Greek 10-year debt for a while, it did raise EUR2.5bn in 5-year debt in January and aims to raise EUR7bn in total this year. Greece had the confidence to dip its toe in the debt markets after Moody’s raised its sovereign credit rating by 2 notches at the beginning of March. Moody’s upgraded Greece from B3 to B1 (still 4 notches below investment grade) with a stable outlook, noting ‘The ongoing reform effort is slowly starting to bear fruit in the economy’ adding ‘While progress has been halting at times, with targets delayed or missed, the reform momentum appears to be increasingly entrenched, with good prospects for further progress and low risk of reversal’.