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Greece Taps The Market

Horne, J. P. (2014) “Greece Taps The Market“, The European Institute.


The Greek government borrowed on the international bond market last week, the first time in over four years.[1] The bond issue comes just five years after Greece’s severe economic and financial crisis had become an existential threat to the euro itself. The fact that Greece was able to borrow €3 billion for five years at 4.75%, with orders totaling €20 billion from a horde of yield-hungry investors, on Thursday, April 10, signaled Greece’s emergence from financial quarantine. A day later, German Chancellor Angela Merkel visited Athens to assure Greek Prime Minister Antonis Samaras that Germany would continue to support his government’s painful and ongoing structural reforms.

This visit, a courageous one, as many Greeks revile Merkel and Germany for, in their view, having imposed the austerity that caused a historic economic depression of 21 straight quarters of declining GDP and a national unemployment rate 27.6% – (58% for under25-year olds.) But this draconian cure for budgetary excesses, huge deficits and debt, was, in fact, prescribed by the “Troika” of the European Commission (EC), strongly backed by Germany; the European Central Bank (ECB) and the IMF. Painful as it was, austerity did produce results positive enough to enable Greece to borrow again.

Government spending dropped dramatically (Fig. 1), causing the budget deficit to improve sharply (Fig. 2), enough so that the primary budget balance (excluding interest on the national debt) was in surplus; and the huge debt-to-GDP ratio has started to decline (Fig. 3).


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