Greece borrows near 60 bln euros

The Greek government has borrowed an additional 4 billion euros, on top of the 55.4 billion euros already borrowed so far this year, in order to cover short-term finance needs. The borrowing requirement was met by taking out European Commercial Paper (ECP), a form of commercial paper traded on international capital markets that is normally used to meet short-term needs, ranging from a few days to a few weeks. ECPs are a form of borrowing that is not normally made public. One could argue that there was nothing unusual in this move if Economy and Finance Minister Yiannis Papathanassiou had not recently stated that the state borrowing program had been completed for the year. The minister has also said in interviews recently that the only other borrowing requirement for 2009 is the refinancing of 3.5 billion euros of Treasury bills that expire on October 6, and that whatever new government is to emerge from the elections would find in the state coffers some 8 billion euros in cash. A senior official from the Public Debt Management Agency told Kathimerini that Greece’s net borrowing through ECPs at this moment stands at 4 billion euros. Fixed-income market sources estimate the figure ranges from between 5 and 7 billion euros of which 2 billion expire in January, meaning that 4-month ECPs had been issued. Taking into account 4 billion euros of debt via the ECPs, Greece will have borrowed 59.4 billion euros this year, versus an initial target of 40 billion euros. The use of this debt instrument raises questions as to why the government didn’t tap capital markets as it usually does, via bonds or T-bills. Current market conditions are also more favorable for borrowing with bonds due to the narrowing of spreads. Obviously the reason the government didn’t is the negative political impact the news would have, highlighting that the public debt is much higher than the official figure and that the country’s fiscal health is worse than previously expected.