Greece raises $1.63B in debt sale at lower cost

AP News
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Posted: Oct 19, 2010 11:02 AM
Greece raises $1.63B in debt sale at lower cost

Greece raised euro1.17 billion ($1.63 billion) Tuesday by selling 13-week treasury bills in an auction that saw lower borrowing rates than a similar issue last month _ modest progress in overcoming its debt crisis.

The sale, originally for euro900 million ($1.2 billion), was oversubscribed 5.19 times and had a yield of 3.75 percent _ down from the 3.98 percent settled in a Sept. 21 auction for similar three-month treasury bills.

Greece began monthly short-term debt issues in September to maintain a presence in the market after its financial crisis effectively blocked it out of the long-term international debt market, with investors demanding prohibitively high interest rates for its bonds.

The country needs to get markets to lend to it at lower interest rates to avoid further financial trouble. Some economists say Greece may still have to restructure its debts in coming years.

Athens is currently receiving rescue loans from a three-year euro110 billion package by the International Monetary Fund and other eurozone countries. In return, the government has imposed strict austerity measures, including trimming pensions, raising taxes and cutting civil servants' pay, in an effort to overhaul its debt-ridden economy.

The crisis broke out late last year, after the newly elected government of Prime Minister George Papandreou drastically revised the country's budget deficit upwards, saying the previous administration had been fudging statistics.

The European Union's statistics agency, Eurostat, is to further revise the deficit and debt figures for 2006-2009, with authorities in Greece saying the deficit for 2009 is expected to rise to about 15 percent or higher.

But the government insists that it will still meet its targets of reducing the deficit to 8.1 this year and 7.6 percent by the end of 2011.

The upcoming revision "in no way changes the targets or the ability of the Greek government to achieve the goals it has set," Finance Minister George Papaconstantinou told reporters in Luxembourg, where he was attending a meeting of EU finance ministers.

In Athens, the government announced a nearly euro2.6 billion ($3.6 billion) jobs package to combat unemployment, which is expected to reach 15 percent in the next two years. The measures aim to help create or retain 670,000 jobs.

"Unemployment is the number one problem we have before us," Papandreou said during a meeting with the heads of business and labor groups. "There is no point today for one to lie about the true problems and just create impressions. Unemployment in our country exists, and exists today as a result of an economy that has been slowly dying for years."

Papandreou said the government's aim was to "strike at the root of the problems, because we have had the engines of growth turned off for a long time."

The government has said the unemployment rate, which stood at 12 percent in July, is set to rise to 14.5 percent next year and 15 percent in 2012.

The measures include subsidies for employers to help meet social contributions for workers, the hiring of unemployed young people and women, and the support of those considered particularly vulnerable, including the handicapped, people released from prison and drug addicts.

"Businesses cannot be viable, when a large section of our society is unemployed and has no essential consumer power," Papandreou said. "On the other hand, citizens cannot find work if the country's businesses are not healthy, viable, competitive and don't invest in manpower."