Greece's hopes of returning to the debt markets after a three-year absence have been held up by one of its main creditors, the International Monetary Fund.
Under the strict conditions of its bailout, the country's debt burden is still too high to contemplate selling more debt, according to the IMF.
But there is a compromise option, which Greece should pursue.
The Hellenic Republic had been laying the groundwork to issue as much as 4 billion euros ($4.6 billion) in five-year bonds after repaying 6 billion euros of its existing debt this week. But the funds to pay down that debt came from the European Stability Mechanism, so Greece's overall debt hasn't been reduced, simply extended.
The IMF's opposition to issuing new debt doesn't stop Greece from shuffling its debt stack by lengthening maturities.
Greek banks that own the country's 4 billion-euro bond due in 2019 would willingly swap their holdings for a longer-dated bond with extra yield, especially now the July 2017 bonds have been paid back.
The government had already been planning to exchange those 2019 bonds for a new five-year security -- and it was hoped that that new 2022 issue would be open to outside investors as well. That part might now have to wait, but the option would be still be there.
This exchange technique was popular with others, like Portugal, when they were trying to return to the debt markets after the euro crisis.
Another option would be to allow some of Greece's 15 billion euros of debt that matures in a year or less to mature without being replaced with new debt. That would reduce its outstanding borrowings, allowing it to contemplate selling longer-dated bonds.
But reducing liquidity within the finance industry -- banks use these securities to get funding from the ECB -- in Greece's still perilous state is a risky short-term ruse that the IMF, and potentially the ECB, would view dimly.
The Greek cabinet meets today. It is unlikely to give the go-ahead for any new debt until it has seen the results of the IMF report on Greece due later this week. There might also be some good news from S&P, which is due to update its credit review on the country after the markets close on Friday.
Greece needs to capitalize on the momentum that has built up behind a new issue by moving ahead with a new bond -- even if it is only available initially for holders of its existing debt. Then, at least, the platform would be there for the next step once the wrangle with the IMF is settled.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the editor responsible for this story:
Edward Evans at firstname.lastname@example.org