Bonds record defended

Economy and Finance Minister Giorgos Alogoskoufis yesterday defended the government against opposition charges of serious responsibility for the mismanagement of social security fund reserves. In an attempt to improve the government’s battered image following a spate of revelations over the last month that social security funds purchased overpriced government bonds, he said the uproar was mostly the result of misinformation deliberately spread by the opposition. Speaking at a press briefing, Alogoskoufis said Greece had in recent years issued -1.85 billion worth of structured bonds – a relatively new and riskier financial instrument than straight bonds – out of a total -20 billion in the European Union and -800 billion worldwide. Roughly -777 billion of this sum had been absorbed by state-run social security funds and the remainder by foreign institutional investors. Structured bonds, which feature tiered interest rates for their duration, were issued by the Greek government chiefly to raise money for the country’s sizable arms bill. Countering charges that state pension funds had suffered considerable losses in the value of their assets as a result of the risky investments, Alogoskoufis maintained that the total value of these assets had risen by 42 percent since 2003, from -21.8 billion to about -31 billion in 2006. In contrast, he said, as a result of the irresponsible policy of the previous PASOK administration to use pension fund assets to artificially prop up the stock market in the period 1999-2002, their total value had declined by 13.4 percent, or -1.6 billion. «The yields of structured bonds can be evaluated over time, and in any case the capital invested in them is guaranteed. The funds will not lose any of their capital, as happened with the purchase of equities in the period 1999-2002,» he said. Alogoskoufis said the amounts invested in structured bonds by pension funds in the last three years totaled -1.26 billion (-777 million in government bonds and the rest in bonds issued by banks), which represented no more than 4 percent of their reserves. He also dismissed charges that the government had tried to cover up the alleged scandal of the overpriced bond that was sold to the Public Servants’ Supplementary Fund by the brokerage Acropolis, or that it had issued «secret» bonds. Finally, he said a number of funds had bought bonds in July 2006 with money they raised from the sale of shares of Emporiki Bank, which was privatized.

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