ECONOMY

Gov’t takes it one month at a time

Greece expects to meet its financing needs next month after raising nearly 2 billion euros in an oversubscribed debt auction, said Finance Minister Giorgos Papaconstantinou yesterday. Papaconstantinou said that Greece will either activate the joint European Union and International Monetary Fund rescue mechanism or continue to seek funds on capital markets as it moves to raise the just less than 10 billion euros that it needs in May. «If we decide to activate the mechanism, its approval will take place very quickly. There is no way that we will be left hanging in May,» he told reporters in Athens. The Public Debt Management Agency yesterday raised 1.9 billion euros through the auction of 13-week treasury bills in an offer that was oversubscribed five times. The rate was at 3.65 percent, double the interest rate in the previous auction held in January. Analysts described the high demand for the short-dated debt as being positive but pointed to the high price tag as reflecting continued uncertainty about Greece’s ability to withstand default and details over how the country will be helped by the rescue plan. The yield premium investors demand to buy 10-year Greek bonds rather than German debt rose to a euro lifetime high of 484 basis points, from Monday’s 474 basis points. Papaconstantinou is expected to meet today with IMF, EU and European Central Bank officials as part of preparatory talks on the aid package worth up to 45 billion euros. The financial advisory teams will be in Athens for talks for 10 days and will also meet with officials from several ministries, the Greek central bank and different social and employer groups in order to have a «more complete picture» of the economy, added the minister. Discussions are expected to focus on the fiscal measures Greece will need to take in 2011 and 2012 to meet its targets. The minister avoided responding to questions about press reports saying that the IMF and EU will demand pay cuts in the private sector to help boost the country’s sliding competitiveness, but he did say that labor costs are not one of the country’s main economic problems. «Competitiveness has to do with the direction of exports, how hard it is to open a business, bureaucracy and the stableness of the tax system,» he added. [email protected] ‘Things aren’t that bad’ Greece’s economic performance this year will not be as bad as predicted by some economists, according to Finance Minister Giorgos Papaconstantinou. Economists forecast the Greek economy to contract by between 2 and 4 percent this year as recent austerity measures weigh on consumption spending, which accounts for just over two-thirds of annual economic growth. «Initial signs make us cautiously optimistic that things aren’t that bad. The gray economy could act as a cushion to private consumption,» the minister told reporters. Greece’s gray economy – legal activities, such as the provision of medical services, where taxes are not paid – accounts for about a third of the country’s regular 250-billion-euro annual gross domestic product according to some estimates. The Finance Ministry’s last official estimate for economic growth in 2010 sees a contraction rate of 0.30 percent year-on-year but Papaconstantinou has admitted that this target is no longer achievable, without providing any further estimates.