Swift market comeback could be game-changer for Greece

By Marius Zaharia

Greece could be on the verge of making one of the fastest market comebacks of a defaulted sovereign ever recorded.

To the surprise of doomsayers who just two years ago reckoned its debts were so big that only a return to a devalued drachma could save it from decades of ruin, Greece is now mulling a five-year bond sale within the next three months, according to a Finance Ministry official.

The plan to return to capital markets just over 24 months after its debt restructuring amounted to default appears to make little sense on paper.

Estimates of Greece's potential market borrowing costs over five years range from 3.25 percent to 6.5 percent - indicating that even the most optimistic scenario is more than double the roughly 1.5 percent cost of borrowing from the European Union.

But if Athens can persuade private bond investors to buy 1.5-2 billion euros so shortly after imposing heavy losses on them, it could be a game changer that boosts its ability to repay its debts at affordable interest rates.

It would not only raise confidence in Greece's ability to fund itself and aid its recovery, but it also offers Europe the chance to claim its widely criticized crisis medicine of tough cuts and austerity was necessary and ultimately successful.

"It would be hugely important for them in a symbolic way," said Hung Tran, executive managing director at the Institute of International Finance, a global financial industry body that negotiated Greece's debt restructuring in March 2012.

"The government wants to have the narrative that Greece has overcome the crisis and regained international confidence... If you look at it from the eurozone's perspective you might consider (Greece's progress)... a success...