Greece strikes as spending cuts loom
George Papaconstantinou, Greece's finance minister, is currently racing around European capitals in an effort to reassure investors and keep alive Greece's ability to borrow from the markets
Thursday December 17 2009
GREECE will be hit by a one-day public sector strike today as the country battles to cut spending and borrow more.
The country raised €2bn yesterday from friendly banks and said it aimed to resume issuing bonds to international markets in January.
Greek Finance Minister George Papaconstantinou is currently racing around European capitals in an effort to reassure investors and keep alive Greece's ability to borrow from the markets, which have been alarmed by downgrades to the country's credit rating as its budget deficit mounts.
In London yesterday, he acknowledged that Greece faced a "confidence deficit" but predicted markets would become more willing to buy Greek debt as they saw Athens implement plans for spending cuts.
"I think that is what they are waiting for -- to see the translation of what we are saying in the legislation into actual expenditure changes," said Mr Papaconstantinou, a 47-year-old former economics professor who took up his post as part of a new Socialist government in October.
Mr Papaconstantinou said comparisons of Greece by some analysts with crisis-hit Dubai or bankrupt Lehman Brothers were "far-fetched".
The markets have been speculating that Greece might eventually need a bailout from its European Union partners, if its problems threaten to damage the euro currency zone. But Mr Papaconstantinou said the country was determined to solve its problems on its own by cutting its deficit.
Some analysts said yesterday's sale of bonds, which yield 250 basis points over six-month Euribor, a eurozone interbank lending rate, were a positive signal for Greece.
"The pricing is cheap to the secondary market, in other words Greece is paying a higher yield, but the price of the placement is fair and reflective of the current risks involved in holding five-year Greek paper," said Calyon rate strategist, Peter Chatwell.
Greek bonds are the worst performers after Ireland among the debt of so-called peripheral euro-region countries this year, handing investors a 3.5pc return, according to Bloomberg/EFFAS indexes.
Mr Papaconstantinou said Greece expected to return to the international bond markets in late January, raising 10pc of its 2010 funding needs during the month and about 25pc in the first quarter.
The government has promised spending cuts, tax hikes, efficiency gains and a crackdown on tax evasion next year in order to bring state finances under control. Mr Papaconstantinou said he expected Greece to borrow between €52bn and €53bn in all of 2010.
Irish Independent
