Greek bonds soar as Tsipras ditches hard-left ministers.The Greek prime minister’s move to replace hard-left ministers in a cabinet reshuffle has sent the country’s bonds soaring this morning to their best day since July.Amid wavering support in the polls, Syriza’s prime minister Alexis Tsipras announced a shakeup of his cabinet on Friday, replacing critics of the country’s latest bailout reforms with politicians more supportive of its three-year reforms-for-cash rescue deal.
The shakeup has driven yields on Greece’s 10-year bonds down 32 basis points (0.32 percentage points) today to their lowest since before the UK’s June Brexit vote at 7.29 per cent. Yields on two-year Greek debt have fallen a whopping 46 basis points to 4.85 per cent, making the country’s debt easily the best-performing sovereign bonds in Europe today (a bond’s yield falls when its price rises).
Among the cabinet reshuffle, Dimitri Papadimitriou, head of the US-based Levy Economics Institute, was a surprise appointment as economy minister with responsibility for disbursing EU structural funds.
Finance minister Euclid Tsakaltos and his deputy George Chouliarakis both kept their jobs.
Mr Tsipras also ditched three hard-left cabinet members — the culture, education and shipping ministers — but gave a new post to Panos Scourletis, a fierce critic of the bailout reforms who had earlier turned down the coveted position of Syriza party secretary.
A recent poll by Public Issue found the leftist Syriza has fallen 24 points behind its resurgent opposition party, the centre-right New Democracy.
Eurozone finance ministers will discuss Greece at their latest meeting in Brussels today but are not expected to make any substantial progress with the country’s second bailout review before the end of the year.
The new look cabinet is an attempt by Mr Tsipras to show his “willingness to finish the review, force a discussion between Berlin and the IMF over debt relief and hope for an economic recovery that would provide the government with some much needed breathing room”, said Mujtaba Rahman at Eurasia group.
Analysts at French bank Société Générale do not expect the bailout review to be concluded before the first quarter of next year, with clouds still hanging over the IMF’s participation in the rescue deal. The fund will carry out a sustainability analysis on Greece’s 180 per cent debt pile before the end of the year.
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