Greece may turn to EFSF in 2012

Greek Finance Minister Giorgos Papaconstantinou said on Tuesday that Greece may need to tap the European Financial Stability Facility in 2012 if the cost of borrowing in the bond market is prohibitive.

?Our borrowing needs are 66 billion euros in 2012. We are covered with 24 billion euros through the existing loans. The rest must come from the market, including 27 billion euros through long-term loans. We hope the market will be open before 2012. If it does not happen we may tap the EFSF,? Papaconstantinou told reporters in Brussels.

Eurozone leaders decided on Friday night that bailed-out countries could tap the 440-billion-euro EFSF if they were unable to access bond markets. Papconstantinou said last Friday?s decisions constitute a major step by the eurozone to address market jitters.

?The eurozone will turn the page after the March summit. It will have the necessary mechanisms to address future problems,? he added.

The cost of insuring Greek and Portuguese debt against default rose on Tuesday as risk aversion resulting from Japan?s unfolding crisis swept through markets, prompting some of Monday?s fall in the prices of credit default swaps (CDS) to unwind. Reports of rising radiation levels near Tokyo prompted investors to sell riskier assets globally.

?It?s just general risk aversion. Both Portugal and Greece tightened quite a bit on Monday, it?s just a pullback from that,? Gavan Nolan, a research analyst at Markit, told Reuters.

Five-year CDS on Greek government debt rose by 21 basis points to 980 bps, according to data monitor Markit. This means it costs 980,000 euros to protect 10 million euros of exposure to Greek bonds.

Meanwhile, the International Monetary Fund approved late on Monday the third review of Greece?s bailout program, agreeing to release a tranche of 4.1 billion euros. That brings Greece?s total IMF funding disbursements to around 14.6 billion euros, part of the joint European Union-IMF joint rescue package totalling 110 billion euros.

The IMF said Greece?s economic program has made further progress toward its key objectives of putting the economy on a path of sustainable growth by boosting competitiveness, strengthening financial sector stability and securing public finances.

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