Borrowing continues to rise in 2009

Greece, the second most indebted European Union nation, will borrow a total of 50 billion euros this year, more than a previous target of 43.7 billion, Economy and Finance Minister Yiannis Papathanassiou said yesterday. «To shield against a possible worsening of the crisis, we decided, even though we do not need the money… total borrowing will reach 50 billion euros,» the minister said in a statement. In its latest sale of government paper on Monday, Greece raised 7.5 billion euros by selling three-year bonds. Greece is the eurozone’s second most indebted economy after Italy. Public debt rose to 97.6 percent of gross domestic product (GDP) last year from 94.8 percent in 2007, according to Eurostat, the European Union’s statistics office. Greece, Spain, Portugal and Ireland had their credit ratings cut earlier this year as the global crisis fueled concern that Europe’s most indebted nations would have trouble borrowing as credit markets seized up. «A few months ago, some were saying our country would not be able to borrow on international markets. They were projecting that it would be necessary to turn to the IMF,» Papathanassiou said. «All those doomsayers were proven wrong.» The financial crisis widened the premium Greece must pay on its bonds compared to higher-rated core European issuers like Germany – at a time when a slowing economy and weak government revenues increase public borrowing needs. The 10-year spread between Greek and German benchmarks, which hit a record high above 300 basis points in February, stood at 217 basis points yesterday. In response to news of the state’s borrowing program, the main opposition PASOK party yesterday accused the conservative government of «insulting common sense as it attempts to convince us that… we will not be borrowing more than this.»

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