Greece began selling 10-year bonds as protesters in Athens
stormed the finance ministry and blocked roads after Prime Minister George
Papandreou pledged to reduce Europe’s largest budget deficit by cutting wages
and spending.
Greek bonds fell after a banker involved in the sale said
the securities would yield about 310 basis points over the benchmark mid-swap
rate, which equates to a yield of 6.47 percent. The government hired Barclays
Capital, HSBC, Nomura, National Bank of Greece and Piraeus Bank SA, the banker
said.
German Chancellor Angela
Merkel snubbed Greek Prime Minister George
Papandreou’s bid for assistance after he announced his third package of
deficit cuts this year, saying a meeting in Berlin tomorrow won’t be “about aid
commitments.”
Her finance
minister,Wolfgang Schaeuble, said the measures were probably enough to
convince investors to buy Greek debt.
While Papandreou is risking a backlash at home to meet
European Union demands for more cuts, Merkel is facing domestic opposition to
tapping taxpayers to extend a financial lifeline to Greece.
“There would be no understanding in Germany for bailing out
Greece,” Henrik Enderlein, a political economist at the Hertie School of
Governance in Berlin, said by phone. “It’s a bit of catch-22 situation: if you
give in to Greece and you put 5 billion or perhaps even 10 billion into some
kind of rescue package or into some guarantees, then the German government
would look irresponsible. However, if it doesn’t, then European Union leaders
might put a lot of pressure on Merkel and say, look, we have to bail out
Greece.”
Premium
Widens
The premium
investors demand to buy Greek governmentdebtover comparable German
bonds, the European benchmark, rose 6 basis points to 2.92 percentage points at
10:06 a.m. in London after yesterday’s 19 basis point drop.
The
government wants to avoid a repeat of its sale of five- year notes in January,
when the debt tumbled on the first day of trading.
Greece
faces more than 20 billion euros in
debt redemptions in April and May.
The EU is
devising a plan to grant
Greece
about 25 billion euros in emergency
aid should the need arise, German lawmakers have said, enough to cover the
maturing debt. One option could involve using state-owned lenders such as
Germany
’s KfW Group to buy its bonds.
Athens
Protests
In
Athens
, about 200 members of the PAME
union, aligned with the Communist Party, were reported at the finance ministry
and protesters also took over the nearby General Accounting Office, according
to a police spokeswoman. Another group blocked a central road, snarling
traffic.
The
demonstrations followed the Cabinet’s backing yesterday of 4.8 billion euros
($6.6 billion) of cuts and Papandreou’s statement that
Greece
was prepared to turn to the
International Monetary Fund as a last resort.
“We have
fulfilled to the utmost all that we must from our side; now it’s
Europe
’s turn,” Papandreou told his
ministers yesterday, according to an e-mailed transcript. “It is a historic
moment for the European Union.”
Papandreou’s
Cabinet endorsed a package of revenue-raising and budget-cutting steps,
including higher fuel, tobacco and sales taxes and a cut of 30 percent in three
bonus payments to civil servants on top of a wage and benefits freeze.
The
measures are “convincing,” the European Central Bank said in a statement. The
ECB appreciates the Greek government’s recognition of the need to “rapidly
adopt and implement decisive structural reforms.”
‘Coordinated
Action’
For now,
European governments have not stepped up since a statement at a Feb. 11 EU
summit promised “determined and coordinated action” to support
Greece
.
“There’s no
need for such a thing at this point in time,” French Finance Minister Christine
Lagarde said late yesterday on Sky television. “If it was required, the
partners in the club would be available to restore stability.”
After
meeting Merkel in
Berlin
, the Greek leader is due in
Paris
two days later for talks with
French PresidentNicolas Sarkozy.
Merkel’s
comments were the clearest signal yet that
Germany
isn’t convinced.
“I
expressly want to say that Friday isn’t about aid commitments, but about good
relations between
Germany
and
Greece
,” Merkel said yesterday in an
interview with N-TV, according to a transcript provided by her office.
Greece
’s steps are “an important signal”
toward restoring confidence in the euro.
Papandreou
Package
Greece
has pledged to trim a deficit of
12.7 percent ofgross domestic productto 8.7 percent this year. Concern
that
Greece
won’t be able to tame the shortfall saw the
euro lose almost 5 percent against the dollar this year.
Greece
has blamed market speculators for
fueling the decline in its securities. European officials have warned hedge
funds that they shouldn’t try to profit from the woes of the region’s nations.
U.S.
authorities have told some hedge
funds not to destroy trading records on euro bets, according to a person with
knowledge of the requests.
Banks and
regulators across
Europe
were summoned by the European Commission to discuss regulation of the
market for sovereign credit-default swaps in the wake of the Greek debt crisis.
(from Bloomberg)