Athens has outlined plans to return to the financial markets for the first time since 2014, with a plan to sell new five-year bonds to investors.

Existing Greek five-year bonds were trading at 3.6% on Monday morning compared with 63% at the height of the Greek financial crisis in 2012 when the finance ministry was unable to pay public sector wages and there were riots in the streets. Following the announcement that Athens would be returning to the market, the yield fell to 3.4%.



The Greek finance ministry has set a goal of a 4.2% interest rate on the new bond. But banking sources believe that level will be hard to achieve and say an interest rate of between 4.3% to 4.5% is much more likely.

Government sources say valuation will take place on Tuesday 25 July. The market test is crucial to Greece for not only judging sentiment of the market, from which it has been essentially exiled since the start of its economic crisis, but also for weaning itself off borrowed bailout funds.

Speaking after the bond issue was announced, the EU’s economy commissioner, Pierre Moscovici, described the public spending cuts imposed on Greece since it almost went bust as “too tough” but “necessary”, adding there was now “light at the end of austerity”.

Reuters reported that Greece had employed six banks – BNP Paribas, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and HSBC – to act as joint lead managers for a five-year euro bond “subject to market conditions”.

Greek ministers will provide more details on Monday afternoon about how much it hopes to borrow, and on what terms.

If the issue is successful, it could help Greece, which is still coping with a debt to GDP ratio of 180%, to exit its long cycle of austerity and rescue packages.

Late on Friday, S&P upgraded its outlook on Greek government debt from stable to “positive”, thanks partly to renewed hopes that the country’s creditors could finally grant it debt relief.

The interest rates on Greek bonds have fallen away from their sky-high levels at the height of the crisis following a broad recovery across the 19-member eurozone and Athens’ bigger than expected public sector surplus, fuelling hopes that the country could fund itself without the help of bailouts.

Statements by the European Central Bank boss, Mario Draghi, have also appeared more supportive of southern European states, which remain highly indebted and are emerging only gradually from the after-effects of the financial crisis.

“Sentiment is still very positive after the ECB sounded dovish at last week’s meeting,” said Benjamin Schroeder, a rates strategist at ING.

Moscovici told France Inter radio before a visit to Athens for talks with Alexis Tsipras on debt relief that “Greece was caught up in an incredible economic and financial storm”.



He said: “Today, things are much, much better. We had to create the conditions for [investor] confidence, which was done. Was it too tough? Probably. Was it also necessary? Likewise,” Moscovici said.

The debt-ridden country went to the brink of collapse in 2010. It had to be repeatedly bailed out by its eurozone partners to prevent it bringing down the single currency bloc.

In a sign that the country is turning a corner the economy is projected to grow by 2.1% this year – after no growth at all in 2016. Unemployment has fallen 1.9 percentage points in a year but was still stuck at 21.7% in April.

The International Monetary Fund last week approved a one-year, $1.8bn loan programme for Greece.

However, the IMF said it would not release any funds until the eurozone agreed on a deal to cut Greece’s €314bn debt burden.

Moscovici said the “140 extremely courageous reforms” undertaken by Athens meant there was now hope of “finally finding a solution to the debt problem”.