Concerted effort to appease market
The government and the Bank of Greece (BoG), the country’s central bank, yesterday launched a coordinated effort to support the local market and Greek bonds, after a panic on Thursday engulfed the local bourse and sent bond premiums even higher. The move appeared yesterday to have borne fruit, temporarily at least, as it did help the stock market to move up somewhat and reduce the difference, or spread, between the Greek 10-year bond’s yield and that of the benchmark German Bund. Finance Minister Giorgos Papaconstantinou attributed the negative developments of the last few days on the Greek bond market to a combination of the country’s loss of credibility and the profiteering games of certain investors. He added that the country has no immediate cash needs and that the borrowing program for next year will be less than this year’s. Funds borrowed this year will reach 64 billion euros, while the plan for next year is for 54.6 billion euros. BoG Governor Giorgos Provopoulos said after his meeting with Papaconstantinou yesterday that the country’s banking system is healthy and the capital adequacy indices are high and improving. He also noted that Greek banks are interested in freeing themselves from the strictures of the government’s support package, which is expected to take place in 2010. Although the bond spread had soared to 219 basis points yesterday morning from 205 on Thursday, after Papaconstantinou and Provopoulos’s statements, it contracted to 188 bps later in the day. Ministry sources suggested that there had been some extremely negative reports on Greece over the course of the week, against which there have been certain corrective moves. «We are building the country’s credibility day by day with our initiatives,» said Papaconstantinou, adding that the new budget’s big challenge is the containment of tax evasion and the better use of public spending. New Democracy spokesman Giorgos Koumoutsakos countered that all this has been due to the government’s lack of a credible plan for exiting the crisis.
