ECONOMY

Greece eager to show policy is on right fiscal track

Economy and Finance Minister Yiannis Papathanassiou yesterday presented in Brussels Greece’s latest measures aimed at tidying up state finances as concerns grow over the ability of European Union states to borrow funds. Papathanassiou was keen to show his peers that Greece’s finances are under control, despite the rising deficit, and that his ministry will cut the budget shortfall to below the 3 percent threshold by the end of 2011. Last week, Greece upped taxes on tobacco and alcoholic beverages to lift state revenues and reinstated a tax-free limit for the self-employed to boost small businesses. European finance ministers are increasingly concerned that certain governments are finding it harder to borrow in financial markets as budget deficits mount and economies slump. The widening gaps between the interest rates different eurozone nations must pay bond investors are «worrying developments,» according to a «speaking note» prepared for Luxembourg Finance Minister Jean-Claude Juncker, Bloomberg reported yesterday. Ministers are also concerned about weak demand at some government bond auctions, according to the document. The split between the rates Spain, Italy, Greece and Portugal must pay in financial markets to borrow for 10 years and the rate charged to Germany ballooned this year to the widest since before they adopted the euro. This is threatening to impede the recovery of the region’s weakest economies and even raising doubts about the future of the single currency bloc. Meanwhile, Greece has set the final size of its planned three-year bond at 7 billion euros and will price the deal at the tight end of initial guidance after generating strong demand. Greece is expected to price the deal today at mid-swaps plus 190 basis points, at the tight end of an initial guidance range of 190 to 200 basis points. Banking sources said that offers for the three-year bond exceeded the 10-billion-euro mark. Greece, which suffered a rating downgrade by Standard & Poor’s last month to A-, has said it plans to borrow about 42 billion euros this year.