Wall Street Journal
April 13, 2014
Greece's return to the bond markets last week was a symbolically important moment for the euro crisis. For the country at the center of the crisis to draw €20 billion ($27.77 billion) of foreign demand for a five-year bond yielding under 5% shows that the market now believes Greece will stay in the euro zone, that it won't collapse into chaos and that any further debt relief will be provided by official rather than private lenders. A year ago, there were few takers for that bet.
But this was only the latest in a series of remarkable developments this year that show how far market sentiment toward Southern Europe has changed.
This shift began in January when the nationalized Spanish lender Bankia was able to issue an unsecured bond. Since then, Madrid has sold shares in Bankia to international investors. Other Spanish banks, along with Italian, Austrian and even Greek banks, have raised capital.
Buying bank equity is a bigger bet on economic recovery than buying sovereign bonds since there is no implicit guarantee from the European Central Bank.
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