Greece, long the problem child of the eurozone, took a major step on Wednesday toward securing financial independence as it prepares to wean itself off the international bailouts that have kept it afloat for the last eight years.
The government’s announcement of a bond swap could help ease a staggering debt burden that at one point threatened to push Greece out of the eurozone. The swap is intended to shore up confidence for next summer, when the country at long last stops receiving international financial aid that will by then total 326 billion euros, or about $380 billion.
The announcement came after Greece successfully sold bonds on the international markets in July. That sale, the first after a five-year hiatus, was part of a broader effort to illustrate the country’s continuing recovery from troubles that stemmed from the financial crisis that began on Wall Street nearly a decade ago.
Prime Minister Alexis Tsipras yearns for the day he is able to regularly sell Greek bonds to foreign investors, thus cutting the country’s ties to financial lifelines. That would also have the effect of helping persuade the European Central Bank to buy Greek bonds as part of its huge regional stimulus program — something the bank has refused to do for years — and further improve Greece’s finances.
“The return to capital markets is part of the belated success story narrative that the Greek government together with the European Central Bank and the European Commission are trying to create,” said Jens Bastian, an economics consultant based in Athens and a former member of the European Commission’s task force on Greece.
The government’s announcement on Wednesday concerned an offer to convert 20 Greek bonds worth €30 billion into five new debt issues with long maturities.
The initial bonds were issued after a 2012 restructuring of Greek debt that forced private investors to take significant losses. The new bonds will most likely be more liquid — and easier to buy and sell — creating more incentive for big Wall Street investors like Pimco and Franklin Templeton to buy them.
The swap will only work, however, if the existing bondholders agree to sell. The Greek government set a deadline of Nov. 28 for offers.
Still, the offer has already had an effect. As news of the swap seeped into financial markets, Greece’s bond yields have come down sharply, to around 5 percent — a long way from the 22-plus percent rates that investors required the government to pay out because of the risk of buying its bonds at the height of the crisis. As a result, the country may be able to borrow at relatively low interest rates in the future.
At present, a calmer climate has returned to Greece after years of financial drama, attracting the attention of investors. American companies and financial firms in particular have intensified their searching for deals as the Greek economy has shown signs of stabilizing.
Yet despite interest by international investors in the possibility of reaping rich rewards from investing in Greek debt, the country’s economy continues to struggle, Mr. Bastian said, adding that the success story narrative is “overstated.”
Last week, the Greek finance ministry lowered its economic growth projection for this year from 1.8 percent to 1.6 percent. Unemployment has declined — from 27 percent at the height of the crisis to 21 percent today — but it is still the worst in the 19-nation eurozone.
Banks are still loathe to lend, and nonperforming loans on banks’ balance sheets continue to block a recovery, Mr. Bastian said. That has had an outsize impact on small- and medium-sized businesses, which are the motor of the Greek economy.
And for average Greeks still struggling to recover from years of hardship, this latest maneuver to please Greece’s foreign creditors held little meaning.
Mania Kouvari, 46, a teacher at a Greek state school, saw the bond issue as an attempt to distract public opinion from the fact that Greeks remain largely under foreign supervision — recent tranches of bailout funds have required, as a condition, painful austerity to be passed by Parliament — and indebted to international powers.
“They are trying to show a positive image so that people invest in Greece and everything looks normal,” she said. “But under the surface things aren’t normal. People are struggling.”
Ms. Kouvari said her own salary had been cut three times over the past seven years and that one of her two children was unemployed. “Is that a success story?” she said.
Stelios Arvanitis, 68, a retiree, said his grandchildren were “working for peanuts.”
“They have no real future here,” he said “And then the government tells us about bonds. It has no bearing on our lives. And we’re still going to be in debt for years to come.”