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Greece sweetens deal in first debt issue since bailout

Greece sweetens deal in first debt issue since bailout
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First Published: Tue, Jul 13 2010. 03 58 PM IST
Updated: Tue, Jul 13 2010. 03 58 PM IST
Athens: Struggling Greece on Tuesday raised fresh funds from the markets in its first sale of government debt since an EU-IMF bailout saved it from default but it had to sweeten the deal to attract buyers.
Athens sold €1.625 billion ($2.04 billion) in six-month treasury bills at a rate of return of 4.65%, slightly higher than an equivalent sale in April, the Greek debt management agency (PDMA) said.
“The total bids reached €4.546 billion and the amount finally accepted was €1.625 billion,” the agency said in a statement.
Greece on April 13 offered a rate of 4.55% for equivalent six-month bills, up sharply from 1.38% in January as the financial markets turned against the debt-stricken country.
It initially sought to raise €1.25 billion in Tuesday’s sale.
The auction came two months after Greece was rescued from insolvency by a €110-billion ($138-billion) loan package put together by the EU, the European Central Bank and the International Monetary Fund.
In return, Athens pledged to put its parlous public finances in order with draconian austerity cuts. The measures have sparked protests in the recession-hit country but the EU on Monday said the reforms were on track.
“The adjustment ... is impressive and has outpaced our expectations,” the head of eurozone finance ministers Jean-Claude Juncker said in Brussels.
He said that the results should enable Greece to continue drawing down the EU-IMF loan. The next installment is due in September, after a joint review by the EU, the ECB and the IMF in August.
The Greek finance ministry on Monday said it had made huge progress in restoring the country’s finances to health in the six months to June, cutting the public deficit by some 46%, well ahead of target.
Despite the positive news, analysts had doubted that Greece would return to markets at this stage as uncertainty over its still-frail economy seemed likely to keep its borrowing costs at prohibitive levels.
The Greek finance minister, however, recently said the country’s return to borrowing would be “no market test” and Athens should have no trouble attracting interest.
“The logic is that one should always remain on the market to have reference prices. Failure to roll over short-term obligations does not send a good signal,” Finance Minister George Papaconstantinou told AFP in a 30 June interview.
He added that the renewal of short-term debt was included in the agreement Greece signed with the EU, the ECB and the IMF in return for the rescue loan.
Greek treasury bills worth 4.56 billion euros mature this month.
One-year and six-month bills worth a combined €2.16 billion must be settled on 16 July; three-month paper worth €2.4 billion falls due a week later, according to the Greek debt management agency.
The country is labouring under a mountain of debt approaching €300 billion and its economy is trapped in recession.
In its previous debt issue on 20 April, Greece raised €1.95 billion in 13-week treasury bills and attracted heavy demand but had to pay over double the previous equivalent interest rate.
Three days later, prime minister George Papandreou called for the EU-IMF bailout loan as the country threw in the towel, signalling that it could no longer afford to borrow on the open market.
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First Published: Tue, Jul 13 2010. 03 58 PM IST
More Topics: Greece | Finance | Economy | Bail out | Athens |