ECONOMY

Borrowing to rise 10 pct

Greece, one of the eurozone’s most indebted economies, will borrow 33 to 34 billion euros ($41.5-42.7 billion) next year, about 10 percent more than this year, the head of the country’s debt agency said yesterday. «We will borrow about 33 to 34 billion euros based on the data we currently have,» Public Debt Management Agency (PDMA) chief Spyros Papanicolaou told Reuters in a telephone interview. Greece, which joined the eurozone in 2001, is struggling to reduce its percentage of debt to GDP, which is projected to drop to 104.8 percent this year from an estimated 107.5 percent in 2005, but the government keeps borrowing more to plug a budget deficit. Papanicolaou said most of next year’s borrowing will be in the first half, to cover maturing debt. «We will have more maturities in 2007, bonds that were issued in the late 1990s. The biggest part of these maturities will fall in the first half. About two-thirds of our total borrowing will take place in the first half next year,» he said. Papanicolaou said Greece may issue a new 30-year bond next year along with an inflation linker. «If market conditions continue to be favorable for longer-term paper, it is probable that we will issue a new 30-year bond. For sure a new 10-year benchmark is in the plan,» he said. «If the market welcomes inflation-linked bonds, then we may issue a new inflation linker.» Biggest debt Fresh data by the European Union’s statistics agency Eurostat yesterday confirmed that Greece had the highest percentage of debt to GDP in the eurozone last year – at 107.5 percent, even bigger than Italy’s 106.6 percent. The target for next year based on the draft budget is for public debt to improve further to 100.9 percent of gross domestic product (GDP), which is expected to expand by 3.8 percent to 208 billion euros. These projections may change if Eurostat validates the government’s recent upward revision of national output data to include part of the country’s black economy. «The complete borrowing program for next year will be finalized after November, most likely in early December,» Papanicolaou said. He said Italy’s double downgrade by two ratings agencies last week would not see a repeat in the case of Greece, which is also afflicted by fiscal deficits and heavy debt loads. Fitch and Standard & Poor’s downgraded Italy’s debt and expressed doubts about Prime Minister Romano Prodi’s ability to get public finances under control. «Italy’s downgrade will not affect Greek bonds,» Papanicolaou said. «Greece is on an improving trend, its public finances are getting better. If we manage a drop in public debt in the next one or two years we must not rule out an upgrade.» Greece is struggling to cut its budget deficit to below the EU’s 3 percent cap this and next year to avoid sanctions. The country has under-reported past deficit data, angering its EU partners. The government is aiming for a budget deficit of 2.6 percent of GDP this year. Belt-tightening will seek to shrink it to 2.4 percent in 2007.