Cash raised but at a hefty price

Greece raised 5 billion euros with a bond issue yesterday, passing a key test of its ability to avoid a disastrous debt default but the money came at a high price. Investor demand reached 15 billion euros for the bonds, which yielded 6.3 percent, about double what Germany has to pay for bonds of similar maturity. «Despite the difficult conditions, the trust shown by investors remains strong,» the ministry said in a statement. «However, the high cost shows the necessity to speed up the implementation of the government’s decisions.» The announcement of the issue comes a day after Greece detailed a whole new round of painful austerity measures, including salary cuts for civil servants, pension freezes and tax hikes on cigarettes, alcohol and luxury goods. Greece has to borrow some 54 billion euros through sovereign debt issues this year, and has so far tapped capital markets for 13 billion euros, including treasury bill sales. It has around 20 billion euros’ worth of debt maturing in April and May. But low market confidence in the country has translated into extremely high borrowing costs for Athens, and the government has been seeking a way to borrow at more reasonable rates. European Central Bank head Jean-Claude Trichet praised Greece’s austerity measures yesterday but gave short shrift to a possible bid for International Monetary Fund help that Athens said it had to consider. «We appreciate enormously what has been decided because we judge it appropriate, commensurate to the difficulty and convincing,» Trichet said after the ECB governing council met at the bank’s Frankfurt headquarters. «Greece today is in a much better state… than it was before,» he said. The ECB president did not feel however «that it would be appropriate to have the introduction of the IMF as a supplier of help through standby» agreements, in what might be shaping up as a game of poker between Athens and its eurozone partners.

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