Greece makes further progress on budget front

AP News
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Posted: Sep 12, 2014 1:11 PM

ATHENS, Greece (AP) — Greece has made its second successful return to the bond markets as the government revealed Friday that it was beating a key bailout budget target — and by a big margin.

The developments provide further evidence that Greece is slowly weaning itself from the rescue funds that have kept it afloat over the past few years, and were followed later Friday by a one-notch credit upgrade by ratings agency Standard and Poor's.

The agency now rates Greece's sovereign rating at B, from B-minus in March, citing fiscal progress and adequate funding for any future bank recapitalization. The outlook is set as stable. Despite the upgrade, Greece's rating remains deep in junk — or non-investment grade — territory, where it tumbled when the country nearly went bankrupt more than four years ago..

When Greece was unable to raise money in the bond markets in 2010, it had to be bailed out by its partners in the euro-currency zone and the International Monetary Fund. In return, it had to impose big spending cuts, tax rises and enact a raft of economic reforms.

On Friday, the finance ministry revealed that investors were again willing to part with their cash — a sign of growing confidence in the country's financial future. It received offers worth 1.6 billion euros ($2.1 billion) for three- and five-year bonds made available Thursday to holders of Greek treasury bills. No further details were provided.

The country returned to markets in April, with a five-year bond sale that was eight times oversubscribed.

Greece is widely expected to emerge from a six-year recession this year. But its economy is about a quarter smaller than it was and unemployment stands at around 27 percent.

Christos Staikouras, the deputy finance minister, said the January-August state budget surplus — once debt and interest payments are excluded — was double the amount targeted under the country's international bailout program: 1.95 billion euros ($2.52 billion) against the target of 962 million euros.

"We've been within out targets for the third consecutive year and that's a platform we need for the economy to start growing again," Staikouras said.

The government has promised rescue creditors to maintain a balanced budget, meeting a key requirement for them to consider further financial help for the country, and make its runaway public debt sustainable.

One complication could be on the political front as Conservative Prime Minister Antonis Samaras could face an early general election in the spring when parliament must elect a new president. The ruling coalition will need the support of a former government ally and independent lawmakers to avoid a stalemate.

Leftwing opposition leader, Alexis Tsipras, whose party is ahead in opinion polls, confirmed this week that he would not back a government-supported candidate. His party wants to freeze or cancel debt payments to other eurozone countries, allowing job creation programs and the restoration of cuts to pensions and the minimum wage.

Tsipras is due to present details of his economic program on Saturday.

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Nicholas Paphitis contributed.

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