ATHENS, Greece – Greece will issue €900 million in treasury bills next week, the debt management agency said on Friday, as the country tries to regain investors’ trust after financial woes left it essentially blocked out of the long-term international debt market.
The 13-week bills, part of regular monthly short-term debt auctions which began last month, will be issued on 19 October and will have a settlement date of 22 October. Non-competitive bids of up to 30 per cent of the auction amount can also be submitted until noon on 21 October.
On Tuesday, the country raised €1.17 billion in a sale of six-month treasury bills that was both oversubscribed and saw a drop in borrowing costs. That sale, also originally for €900 million, received bids worth 4.22 times the total and resulted in a yield of 4.54 per cent – down from the 4.82 per cent for a similar auction last month.
The rates demanded on the market for Greek government bonds remain prohibitively high, although market sentiment has been improving in recent weeks. The spread – or interest rate difference – between Greek 10-year bonds and the benchmark German equivalent has narrowed significantly, by more than 250 basis points, or 2.5 percentage points, since last month. The spread above German bonds currently stands at about 6.6 percentage points, compared to more than nine percentage points in mid-September.
“I will never tire of saying this – so that we remember it: We found ourselves (one step) from an impasse and total disaster,” Finance Minister George Papaconstantinou said during a speech in Parliament. “We avoided it by making tough decisions, which the Greek people are living under and will judge us by.”
The government has imposed a series of stringent austerity measures, including cutting civil servants’ salaries, trimming pensions and increasing taxes, in return for a three-year €110 billion package of rescue loans from the International Monetary Fund and eurozone countries.
Greece is under strict supervision by the IMF and EU, and has pledged to reduce its budget deficit from the 13.6 per cent of gross domestic product that current figures show for 2009, to 8.1 per cent this year and 7.6 per cent by the end of 2011. The EU’s statistics agency, Eurostat, is expected to revise the 2009 deficit upwards by the end of next week.
“We must all admit that overly-indebted Greece reached its limits,” Papaconstantinou said.
“For a long period, we lived on a razor’s edge. We had growth – sometimes distorted growth – that allowed us just to pay back our debts. But when mismanagement reached such a level, and growth collapsed, this situation of being on a razor’s edge no longer existed. We reached the point ... where markets closed and we needed a support package.” (AP)