January 12, 2018 / 12:14 PM / 2 months ago

Low Greek bond yields are justifiable, euro zone bailout fund says

LONDON (Reuters) - It is justifiable that Greek government bond yields are close to their lowest level in years given the structural reforms and budgetary measures the debt-laden nation has implemented, a board member of the euro zone’s bailout fund said.

Greek government bonds were one of the euro zone’s best performing bond markets in 2017 and have started 2018 on a strong footing on expectations that Greece will exit its bailout this year.

“Greek government bond yield levels at the moment are justifiable,” Kalin Anev Janse, a board member and funding chief at European Stability Mechanism, the bloc’s bailout fund and one of Greece’s chief creditors, said.

He was speaking to Reuters and Thomson Reuters’ IFR in an interview this week.

Greece’s 10-year bond yield hit a 12-year low at around 3.68 percent GR10YT=TWEB on Wednesday, before being pushed up slightly with other euro zone bond yields.

“They have pushed through unprecedented levels of structural reforms and are one of the few countries in the euro zone to run a fiscal surplus along with Netherlands and Germany,” Janse told Reuters.

“Don’t forget that the Greek deficit was above 15 percent in 2009.”

ESM, along with the its predecessor the European Financial Stability Facility, is the fund through which the Greek bailout money has been dispersed.

The fund is at the heart of talks between euro zone members and Greece as the country attempts to exit its bailout programme and reduce its extremely high debt levels.

The two sides reached a preliminary agreement last month, which would cap a slowly strengthening recovery eight years after Greece came close to defaulting on its debt and risked being kicked out of the single currency bloc.

Last year, the country returned to bond markets, raising hopes that it can again become financially independent.

But Janse warned that Greece would have to continue its progress on reforms even if it succeeds in exiting the bailout programme in August, when the current bailout is due to end.

“What is important is that they continue down the reform path even after the ESM programme ends later this year,” he said.

“Some people may fear that this will not happen, but I believe Greece will want to keep that positive message going.”

Reporting by Abhinav Ramnarayan; Editing by Dhara Ranasinghe/Jeremy Gaunt

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