Greece will announce new measures today to meet its deficit-reduction goals after the country’s bond yields hit new highs amid talk it may restructure its debt.
The government’s medium term-fiscal policy plan will detail more than 22 billion euros ($31.9 billion) of deficit-reduction measures through 2014, most of them in spending cuts, according to Finance Minister George Papaconstantinou. The government is also expected to unveil plans to raise 15 billion euros by 2013 through state-asset sales.
Greece came close to defaulting on its debt last year, requiring a 110 billion-euro bailout from the European Union and International Monetary Fund, after it emerged that the country had underreported the size of a budget deficit that reached 15.4 percent of gross domestic product in 2009. The extra yield investors demand to hold 10-year Greek debt instead of benchmark German bunds widened 37 basis points to a record 985 basis points yesterday after German Finance Minister Wolfgang Schaeuble said Greece may have to renegotiate its debt burden.
“There is no question of restructuring,” Greek government spokesman George Petalotis said in an e-mailed statement yesterday. “What the government has to do, and it is the most serious job, so serious that it casts aside any other scenario, is to set goals and stick to them. And that’s what we’re doing with this national strategic plan.”
The measures are aimed at meeting a target, agreed with the EU and IMF as a condition for the bailout, to cut the deficit to less than 3 percent of GDP by 2014 and a self-imposed goal of cutting the shortfall below 1 percent by 2015. The government is still aiming for a deficit of 7.4 percent of GDP this year, even as first-quarter revenue missed the target by 1.4 billion euros.
Deficit Revision
Papaconstantinou acknowledged in an April 1 interview that Greece’s 2010 deficit may be more than the government’s initial 9.4 percent projection. The figure, currently under review by EU statistics agency Eurostat, may be revised to above 10 percent, the Kathimerini newspaper reported on March 29.
Greece’s Public Debt Service Management Agency will today announce the amount of 13-week treasury bills it will sell next week. Greece has continued to hold regular T-bill auctions even as it remains frozen out of international bond markets.
by Marcus Bensasson
source: Bloomberg
