ECONOMY

Demand strong in Greek debt sale

The sale of short-term Greek debt attracted strong demand yesterday but the government paid a higher price than normal as doubts linger over Greece’s long-term solvency despite a 30-billion-euro EU aid package prepared for the country. Finance Minister Giorgos Papaconstantinou said that Greece will continue to tap the markets to meet its funding requirements, rather than making use of the European Union rescue plan agreed on Sunday. The government sold 780 million euros of 26-week bills at a yield of 4.55 percent, attracting bids 7.67 times higher than the securities offered, the country’s Public Debt Management Agency said yesterday. Greece also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times. Analysts noted that the interest rates were more than double previous issues and would exert more pressure on budget spending due to higher interest costs, a factor that could eventually pressure the government into reaching for the lifeline. Sunday’s package confirms that Greece can fund itself in the short term, analysts pointed out after the sale of treasury bills, but they added that longer-term fundamental concerns over Greece’s viability remain as the economy continues to shrink. Other experts said the expiration of a 10-year bond in May will be a major debt hurdle for Greece, testing investor confidence in the country and its ability to return to economic health. Papaconstantinou reiterated that Greece will continue to borrow from markets without the use of the aid mechanism. «We are sticking to our target and I believe we will continue to borrow from markets smoothly, as we did today with the T-bills,» Papaconstantinou told Parliament. Including yesterday’s issue, Greece has borrowed more than 25.5 billion euros so far this year, equivalent to around 10 percent of its gross domestic product, to cover redemptions and deficits. Its projected total borrowing requirements this year amount to 53.2 billion euros.