Remember the Grexit? Well, bond markets are about to stage a re-Grentry, as Greece launches its first long-term bonds since 2010. The country was expected to issue €2bn (£1.6bn) of five-year bonds this morning, although after a bit of confusion from finance minister Yannis Stournaras (asked when it was happening, he told a Guardian journalist: ‘We don’t know. We don’t know. See you. See you’), it looks like it’ll be tomorrow. Exciting, eh?
Head over to Quartz for some brilliant analysis of why this is still a terrible idea - but the gist of it is this:
- Greece’s debt-to-GDP ratio has jumped from 148% in 2010 to 174% in 2013.
- Greek debt is worth more than €300tn - and is still climbing
- Greek GDP is still shrinking (albeit by a lot less than in 2010).
- Greek unemployment is still hovering around 27%.
- Between 2007 and 2013, 24.8% of Greece’s GDP disappeared.
In short: the country has barely started to recover. Allowing it to start borrowing now is like suggesting an alcoholic start drinking a year after they’ve left rehab. It’s not going to end well.
One of the most telling charts in that Quartz piece (and there are lots of good ones. Seriously - go read it) is this:
It shows how when Greece joined the euro in 2001, the market essentially forgot that Greece was a risky investment. Then, in 2007, it remembered. Over the last couple of years, it’s forgotten again. Meanwhile, Germany’s bond yield has bumbled along between 7% and 1.5%.
Meanwhile, Greece is all but closed today because of (yet another) 24-hour general strike, by unions who are 'totally opposed' to the Greek austerity progreamme - the country's only hope of getting out of this mess.
If MT were an investor, it would avoid those shiny new Greek notes like the plague.