"We will be able to satisfy our borrowing requirements in international markets in the next weeks and months, according to the schedule we have," Finance Minister George Papaconstantinou told a banking conference. The minister provided no details on how to cover this year's estimated 53 billion euros ($75.3 billion) in financing needs but Spyros Papanicolau, head of the Greek public debt agency, said Greece could issue yen and dollar bonds this year.
"Our borrowing plans for this year include issuing a global dollar denominated bond and possibly one in yen as well," Papanicolau told Reuters. "It will depend on market conditions." On Wednesday, the finance minister suggested Greece could even issue bonds directly to the public. Greece's budget deficit jumped to 12.7 percent of GDP in 2009, more than four times the limit agreed by the European Union.
That has caused the euro to tumble. It hit a five-month low against the dollar on Thursday. In Greek markets, the premium demanded by investors to buy Greek bonds compared with benchmark German Bunds rose to 311 basis points, the highest since the euro was introduced. The yield on Greek 10-year bonds is now 6.2 percent. Greek stocks fell sharply, dragged lower by banking shares which are suffering as the financial sector faces sharply higher financing costs. The Athens stock index was 3.4 percent lower and the banking index was 5.4 percent down.
"Investors are very wary and this is reflected on the Greek yield spreads," said Pegasus Securities analyst Manos Hatzidakis. "They see that the Greek government is slow in taking those measures that will have immediate results, measures that would bring in money and reduce the country's debt." The government launched a plan last week, including cuts in welfare spending, tax reforms and savings on public sector wages, which promises to reduce the budget deficit to below 3 percent of GDP by 2012.
Rating agencies and the European Union are pressuring Greece to rapidly implement the plan but the finance minister acknowledged that it had still not convinced markets. "Despite the fact that the stability plan was well received by the EU, we have still not convinced markets," Papaconstantinou said. "Until we show some tangible results we will not be able to normalise the international environment."