# Greek bond issue, success or impasse

1 Opinion July 30, 2017 Stern in the News ![Nicholas Economides](/sites/default/files/styles/246w/public/assets/images/uat_025567.jpg?itok=-EvyvLF-) By Nicholas Economides > Unfortunately, it is extremely unlikely that the present Greek government will be able to achieve the required reforms within the remaining year to the end of the EU help program.

After a 3-year hiatus, Greece issued 5-year bonds last week. Unfortunately, the interest rate it paid was so high that it creates serious concerns for the upcoming impasse rather than being a cause for celebration as the Greek government wants. This bond issue does not create a clear path for Greece to enter the financial markets at the end of the EU help program in 2018. Instead, it shows the impasse that Greece will face in mid-2018.

First, the amount of the bond issue was very small, only €3 billion, instead of the planned €4 billion, because demand was low. Of this amount, half was covered with an “exchange” of 2-year bonds held by Greek banks. This means that only €1.5 billion was sold in the open market after a huge effort and significant payments to six banks and the Rothschild bank as an advisor. The amount of the loan is a drop in the ocean compared to the loans that Greece will need from 2018 onwards.

The bonds cost Greece 4.625%, while Greece borrows from the EU at an interest rate below 1%. That is, this issue is very expensive, almost five times more expensive than present borrowing. This is not crucial for a tiny loan of €1.5 billion, but, if the financial markets offer similar rates in 2018, Greece will be unable to borrow since the cost would be prohibitive.

Originally published in Greek by [*Kathimerini*](http://www.kathimerini.gr/920657/article/epikairothta/politikh/ekdosh-omologwn-epityxia-h-adie3odo). Read the full English translation [here](http://www.stern.nyu.edu/networks/Economides_Bond_Issue,_Success_or_Impasse_English_Kathimerini_07302017.pdf).

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*Nicholas Economides is a Professor of Economics at NYU Stern School of Business.* ## More Opinions from Nicholas Economides

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