Greece Postpones Bond Issuance Until International Market Conditions Stabilize

Macro/Political:

• Tomorrow (24/03), Greece will auction 26 Weeks T-Bills with maturity September 25, 2026. The amount to be auctioned is EUR 400mn.
  Source: PDMA

• According to Naftemporiki, the Greek government financial department, in cooperation with the Greek PDMA, has presented a plan for Greek public debt that is adapted to the new international conditions amid the war in the Middle East. The main objective of the plan is to reduce Greece’s debt-to-GDP ratio to below 139%, despite the expected increase in financing needs. The plan includes postponing bond issuance and decreasing treasury bills issuance by EUR 1bn in 2026 until conditions in the international markets stabilize. It also foresees the use of available cash reserves amounting to EUR 10-12 bn.
  Furthermore, yesterday Greek Prime Minister Kyriakos Mitsotakis officially announced that Greece will proceed with an early repayment of EUR 7 bn of GLF loans in June. He also reiterated that Greece plans to repay an additional EUR 5 bn annually over the period 2027-2030.
  Source: Naftemporiki Print Edition (23 March, pg3)

• Scope Ratings maintained Greece’s credit rating at BBB with a positive outlook. According to the agency, the country’s credit rating is supported by strong fiscal performance and sustained primary surpluses, which have placed the public debt ratio on a firm downward path, a favourable sovereign debt structure characterized by long average maturities, predominantly fixed interest rates, sizeable cash buffers, and a high share of official sector financing. Finally, Greece’s credit rating is supported by strong institutional support, including the Eurosystem’s credible monetary and liquidity backstop, alongside EU funding under the NextGenerationEU programme.
  However, Scope highlighted that the challenges to the credit rating include a very high public debt stock, which remains a vulnerability despite its declining trend, as slower growth and rising ageing costs will likely slow debt reduction over time, structural constraints on medium-term growth such as weak labour productivity and adverse demographics, and finally external imbalances, reflected in recurrent current account deficits and a large net international investment position, alongside a services-dependent economy exposed to external shocks.
  Ratings upside risks are a sustained and material reduction in the public debt ratio, supported by continued primary surpluses and prudent fiscal management, improved medium-term growth prospects and stronger external resilience reflected in sustained reform implementation and higher investment, a lasting improvement in the current account balance, or continued strengthening of the banking sector and financial stability framework.
  While downside risks include a stalling or reversal in the decline of the public debt ratio due to weaker fiscal discipline or adverse growth dynamics, and a weakening of macro-economic resilience, reflected in a significant deterioration of external balances or a renewed increase in banking sector risks.
  The positive outlook reflects Scope’s view that the risks to the rating over the next 12–18 months are tilted to the upside.
  Source: Scope

Markets:

• Greek banks remain limited in their ability to finance growth, ECB economists noted in a blog post published on Saturday, despite a remarkable recovery from the economic crisis a decade ago. This constraint is largely due to a significant portion of the country’s private debt remaining outside the banking system. As macroeconomic conditions stabilized and confidence returned, banks benefited from strong liquidity, increased profitability, and improved capital positions. The blog post, however, does not necessarily reflect the official views of the ECB. Furthermore, ECB economists highlighted that Greek banks are once again able to finance households and businesses, thereby supporting investment.
  Source: Reuters