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Eurozone Hopeful as Greece Eyes Self-Financed 2015

Eurogroup President Jeroen Dijsselbloem, center, chats with Luis de Guindos Jurado, Minister of the Economy and Finance of Spain, left, and German Finance Minister Wolfgang Schaeuble, Zappeion Hall, Athens, April 1, 2014.
Greece was cut off from markets in 2010 as the true scale of its debt burden became apparent. But after four years of painful measures to contain debt, two bailouts worth 240 billion euros ($330 billion) and a hit on private bondholders, the Greek economy is expected to return to modest growth this year.

Encouraged by falling bond yields, Greece is considering ending its four-year exclusion from bond markets by selling 1.5 billion-2 billion euros of five-year bonds in a test issue in the first half of the year.

The cash raised would complement money that Athens will get from the eurozone and the International Monetary Fund after a deal in March that unblocks the payment of overdue tranches. The certainty that Greece will have enough money over the next 12 months to cover its expenses is important because it is a condition for the IMF to keep lending to Athens even after eurozone loans stop at the end of 2014.

"We had assurance ... that Greece is fully financed for the coming 12 months," the chairman of eurozone finance ministers Jeroen Dijsselbloem told a news conference after they met.

The ministers decided the next tranche of loans they would send to Greece would be 6.3 billion euros at the end of April.

This will allow Athens to comfortably meet its large bond redemption needs in May.

Greece will get two more tranches of 1 billion euros each in the following months, although the disbursements will hinge on the government meeting specific conditions.

What happens after the next 12 months, however, is still uncertain because it depends on market conditions and on the Greek economy.

Last week, a senior eurozone official said there were no plans for a third bailout, and such an option would be considered only if Athens asks for it.

"I have taken note of the optimism, or, let's say the ambition of the Greek government, not to have another program. Of course I would like to share that ambition, yet I think it's too early to say," Dijsselbloem said.

"It's of utmost importance to focus on commitments in current program," he said.

Earlier on Tuesday, Austria's finance minister Michael Spindelegger said Greece may not need another bailout.

On verge of turning corner

If Athens succeeds in attracting investors to its bonds so soon after imposing heavy losses on them in 2012, it could be a game changer that boosts its chances of servicing its debts at more affordable levels.

That would support economic recovery, and give European policymakers a chance to assert that the much-criticized currency bloc can take care of its members and help them reform.

Greek 10-year yields have fallen to about 6.5 percent from more than 30 percent in the past two years, a striking improvement in the government's notional cost of borrowing.

The European Commission expects Greece to return to economic growth for the first time in six years, predicting gross domestic product (GDP) will grow 0.6 percent this year and 2.9 percent next year.

But with unemployment seen at 24 percent next year and public debt nearly triple the EU limit of 60 percent of GDP, Greece still has a long way to go.

"The Greek economy is stabilizing and we expect a return to growth and a gradual recovery in employment starting this year," EU Economic and Monetary Affairs Commissioner Olli Rehn said.

"To strengthen this recovery and boost job creation, it will be essential for Greece to continue to embrace economic reforms, maintain sound public finances and facilitate targeted investments," he said.