Greek debt crisis eases after boost of €5bn in bonds
Published 05/03/2010 | 05:00
THE immediate crisis over Greek debt eased yesterday when lenders bid a total of €16bn for €5bn in Greek bonds, repayable after 10 years.
The apparently successful borrowing came as Prime Minister George Papandreou prepared to meet German Chancellor Angela Merkel today.
Ms Merkel insisted the meeting would not discuss aid commitments to Greece while Mr Papandreou said his government was not looking for money, but for EU help to borrow on reasonable terms.
The Greek government offered a whopping 6.35pc on the €5bn borrowings, which enticed pension funds and insurance companies to bid for the bonds. Analysts said there was little interest from hedge funds.
The yield compares with a 6.09pc rate in the market on existing bonds due for repayment in 2019, according to data compiled by Bloomberg. The yield on Irish government 10-year debt was quoted at 4.51pc yesterday.
Spain also raised €4.5bn in five-year borrowings, with strong demand. The yield was 3pc, which compares with a 2.36pc market rate on similar Irish debt.
There are persistent reports that EU governments are willing to guarantee, or make available, €25bn if Athens cannot borrow the €20bn it needs to raise over the next three months. The question of whether they would step in if lenders demand very high yields is not clear.
"Sentiment toward Greece has improved after the budget announcements and they're taking advantage of that, while the pricing is pretty much in line with what we expected," said Michiel De Bruin at F&C Investments in Amsterdam. In Athens, about 200 members of the PAME union, aligned with the Communist Party, occupied the six-storey finance ministry building and protesters also took over the nearby general accounting office. Another group blocked a central road, snarling traffic and more protests and strikes are set for tomorrow.
The demonstrations followed the cabinet's backing yesterday of €4.8bn in cuts and Mr Papandreou's statement that Greece was prepared to turn to the International Monetary Fund (IMF) as a last resort.
ECB President Jean-Claude Trichet said yesterday that "it would be inappropriate" for the IMF to give help to Greece. EU leaders have agreed that IMF staff can help monitor Greek fiscal actions.
"We have fulfilled to the utmost all that we must from our side; now it's Europe's turn," Mr Papandreou told his cabinet yesterday. "It is a historic moment for the European Union."
Finance minister George Papaconstantinou urged the EU to reveal specifics of any aid package, to help Greece reduce its deficit and discourage bets against the country's bonds.