DZ Bank: Greece’s strategy for return on investment returns – Closes the trauma left by bankruptcy

Her Eleftherias Kourtali

The long-term strategy of the Greek government for the return of Greece to the group of “normal” government bond issuers is so far very successful, as DZ Bank notes on the occasion of the successful bond exchange / redemption deal that did not participate in PSI and its swap 2017, pointing out that the efforts made have paid off, so that the country can overcome and heal the trauma created by the bankruptcy of the past.

As DZ Bank notes, the acceptance rate of the offer of the Greek State to the bondholders of the PSI series with maturity from 2023 to 2042 reached 72.16% or 2.92 billion. of the total of 4.04 billion euros. The Greek government justifies the exchange / takeover offer stating that the goal is to align market standards with those of other eurozone issuers, normalize the yield curve and increase the liquidity of Greek securities. In fact, PSI series bonds do not meet the characteristics of reference bonds and also have lower liquidity compared to conventional Greek bonds.

However, there is much more behind the recent exchange and takeover offer, as DZ Bank points out. The Greek government is pursuing a long-term strategy of returning to the group of “established government bond issuers” after the numerous crises in recent years. Many steps have already been taken: the country has already successfully returned to the bond market and exited the ESM program. In 2019, the first early repayment of IMF loans took place.

What is certain is that Greece still has a lot of “work” to do, the investment house points out. Next year the liabilities to the IMF will be repaid in full. The first early repayment of GLF loans will follow. With the help of these debt reduction measures, Greece is restructuring its debt portfolio. The country’s ambitious goal is to return to an investment level in 2023.

DZ Bank evaluates the efforts of the Greek government very positively and thus maintains a positive attitude towards the prospects of Greece in general. The government of Kyriakos Mitsotakis, as he points out, gives weight to a broad reorganization of the fiscal policy guidelines after Tsipras’s term.

In addition, this is recognized by rating agencies. Greece’s creditworthiness continues to show an upward trend despite the strong effects of the coronavirus crisis. Greek bonds therefore remain the strongest competitor to Italian bonds in terms of risk premiums and overall performance prospects, although the average rating by firms differs by about two notches.

Of course, he adds, the spread between the two issuers has widened significantly since the recent ECB meeting, as Greece so far only participates in the PEPP program and it is scheduled to expire in 2022. However, DZ Bank expects that Greek bonds will remain part of the ECB’s bond markets next year.

DZ Bank estimates that the growth of Greece this year will move to 8%, while it will remain strong in 2022 “running” at rates close to 4% with Greek GDP fully returning to pre-pandemic levels. In the next two years, the growth is expected to be driven by investments which will be supported by the resources of the Recovery Fund.

Regarding the Greek debt, the house estimates that it will enter a downward trajectory from this year, where it will be 202% of GDP from 206.3% in 2020, while in 2022 it will move to 195% and in 2023 to 190%. of GDP.