Gov’t to borrow 4.8 bln in Q4
Greece will tap capital markets for about 4.8 billion euros in the fourth quarter, topping this year’s -35 billion borrowing target partly due to destructive forest fires, its debt agency said yesterday. The agency’s (PDMA) head said the initial borrowing target for 2007 would be exceeded by about -1.5 billion, partly due to the financial relief given to the victims of the August fires that killed 65 and destroyed farms and forests. «In the fourth quarter we will proceed with 3 bond reopenings, seeking to raise -1.5 billion from each. Another -300 million will come from T-bills,» PDMA chief Spyros Papanicolaou told Reuters in an interview. The government has estimated the cost of the blazes at about 0.6 percent of GDP or -1.2 billion, making Greece eligible for European Union aid. PDMA will reopen a 10-year 4.3 percent bond in October, followed by three- and five-year paper in November and December, along with an issue of T-bills. Greece had planned to borrow -35 billion this year, about -4 billion more than in 2006, to refinance maturing debt issued in previous years. Papanicolaou said borrowing will increase next year. «In 2008, total borrowing will be slightly higher than this year as things stand now. We will have more bonds maturing than in 2007. In 2008 we plan to reissue 30-year paper, depending on market conditions,» he said. Heavy debt burden Greece’s public finances are strained by one of the 13-member eurozone’s biggest debt loads. The country is struggling to reduce its debt to 100.1 percent of GDP this year from 104.1 percent in 2006. This does not take into account a 25 percent upward GDP revision that Greece is hoping will be approved by Eurostat in Brussels. Economists say this would bring Greek debt down to about 80 percent of GDP. The government, aiming for a balanced budget by 2010, may miss a previous 2.4 percent of GDP target because of the fires but is expected to keep the fiscal gap under the EU’s 3 percent cap. Papanicolaou said Greece’s credit rating would likely be upgraded if Eurostat approves the GDP revision and fiscal consolidation continues, a view he has expressed in the past. The country borrows under the name Hellenic Republic and is currently rated A1 by Moody’s and A by both Fitch and Standard & Poor’s. Papanicolaou said the bond market had welcomed the outcome of September 16 snap parliamentary elections when the conservative government won a new term with a slim majority. «Before the election the yield spread of 10-year Greek bonds over bunds had widened by three to four basis points due to uncertainty whether the winner would secure a majority in Parliament. The spread shrank to previous levels after the outcome,» he said. Asked about the impact of the global credit crunch, he said: «The problem is mostly being felt in the financial sector and not by eurozone sovereign borrowers. Whether risk aversion rises or not, I do not think there will be an impact on borrowing terms by sovereigns.»
