Minister silent about savings bond scheme

Faced with fierce opposition from banks and even government ministers, Economy and Finance Minister Nikos Christodoulakis did not make any announcements last night on the so-called «popular savings bonds» tailored for people who have seen their savings deposits yields diminish and even turn negative as interest rates have dropped. It is not known whether the scheme to provide directly to the public tax-free, 12-month bonds, with a yield guaranteed to exceed inflation, will be shelved. What is known is that yesterday morning Christodoulakis, Deputy Finance Minister Minister Giorgos Floridis and Christoforos Sardelis, head of the Public Debt Management Agency, met to discuss the terms of the bond issue. Following the meeting, Sardelis told Reuters news agency that the bonds would be issued toward the end of September 2003, when the government will have to pay 17.1 billion euros to holders of expiring bonds. «The amount to be made available to the public through this new short-term instrument is marginal compared to the total amount which needs to be refinanced,» Sardelis was quoted as saying. According to sources, the three officials decided to limit the issue of savings bonds to 1.2 billion euros. The government plans to issue new debt worth 25 billion euros, almost exclusively through 5- and 10-year bonds. Last night, Christodoulakis, speaking in Parliament on the 2003 budget, not only did not say a word about the savings bonds, but appeared to yield to bank pressure and leave the job of «safeguarding peoples’ savings» to the banks. He admonished banks to «carefully design and… spread to the wider public new financial products that will offer better yield and will safeguard peoples’ savings from inflation.» Christodoulakis’s intention to issue the savings bonds was enthusiastically endorsed by some ministers – none of whom, bankers pointed out, had ever served at a financial ministry – but strongly opposed by some others, who pointed out that this move could keep investors indefinitely away from the struggling stock market and thus quash its hopes of recovery. Bankers, fearful of losing people’s deposits, their commissions, and potential investors in their own financial products, attacked the plan as populist and harebrained, which would only burden short-term debt servicing.

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