There is a lot to do about Greek government bonds. Greece has a large national debt and therefore has to pay high interest on its bonds. This is because Greece has a greater risk of not being able to meet its obligations than, for example, the Netherlands. This deters investors, but at the same time attracts investors. There is increasing attention to buying up Greek bonds. This is because a high interest rate is paid on the government bonds of the Greek government. This is because Greece has a large national debt and investors are not sure whether it can repay its national debt. As a result, there are greater risks involved and investors demand higher interest rates. In March 2010, the Greek government was prepared to pay 4 percent interest on a loan. For comparison, the interest that the Dutch government pays on its national debt is approximately two percent. This is because investors are not afraid that the Netherlands will no longer be able to meet its obligations.
Sale of Greek government bonds
The Greek government has already had to issue new loans twice in 2010. She hopes to raise additional money to meet her obligations. The government bonds are marketed through five different banks, namely Nomura, HSBC, Piraeus Bank, Barcap and National Bank of Greece. During the second registration, the demand for bonds was much greater than the supply. This in itself is advantageous for the Greek government because it means that it does not have to offer a lower interest rate because the bonds are purchased anyway.
Credit position assessment of Greece
In late 2009 and early 2010, many credit rating agencies downgraded Greek bonds. For example, credit rating agency Standar & Poor’s lowered its advice. Initially it was an A recommendation, but this was lowered to BBB+. In concrete terms, this means that Greek government bonds are no longer seen as a safe investment. This causes investors to drop out, but it also attracts a group of investors who see opportunities. They argue that it is not very likely that Greece would no longer be able to pay its debts at all. After all, a country does not simply go bankrupt. The European Union would not simply allow this. Greece is a member of the European Monetary Union and if the country goes bankrupt, this will also have consequences for the euro and therefore for the competitive position of the other euro countries.
Greece’s national debt
Greece will have to make significant cuts and/or increase taxes in the coming years. She must do this to free up extra money to pay off her debts as quickly as possible. Within Greece, these threatened cuts caused a lot of unrest among the population. This is also because they did not see the cuts coming. The previous Greek government had tampered with the budget figures, so that the budget deficit was not known, neither to its own population nor abroad. The Greek government had already done this around the year 2000. Several European leaders reacted angrily and initially did not want to help Greece. Ultimately, a stable Greece is also to Europe’s advantage and that is why Europe decided to come to Greece’s aid by partly guaranteeing Greece’s government bonds through a complicated construction.