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Crisis Over?

Greek MapRemember Greece? As in: “the nation that can’t pay the interest on its government bonds, and will almost certainly default and take down the entire European Union banking system with it?” Or: “the nation that all the ‘experts’ predict will exit the Eurozone and print enough drachmas to pay off its crushing debt burden?”

Last month, Greece returned to the bond market for the first time in four years, selling $4 billion worth of 10-year government bonds at a surprisingly low aggregate interest rate of 4.75%. Eager investors actually oversubscribed the offering.

The country has been bailed out twice in the last 48 months, and its (smaller) annual bond auctions have been purchased by the International Monetary Fund and banks under the direction of the World Bank–which, of course, can be seen as closet bailouts. This is the first time since 2009 that actual investors purchased the country’s debt instruments.

As it turns out, investors who speculated on Greece’s existing (distressed) debt, betting that the country would continue making interest payments, may have been the biggest winners. Because of the growing confidence in repayment, existing Greek bonds returned an aggregate 33% over the past 12 months, according to statistics compiled by Bloomberg. The country’s unemployment rate, while still in the mid-20 percent range, is falling, and there are clear signs of economic recovery. Of course, not all news is good; as the bonds were sold on the global markets, the country’s labor unions were busy forcing schools to close and bringing the nation’s public transport system to a standstill. Ordinary workers are still protesting the government’s austerity measures, even though they finally seem to be working.

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