Tags: EU | Greece | Financial | Crisis

Greece Awaits Reaction to Cuts Before Bond Issue

Tuesday, 02 Mar 2010 08:26 AM

Greece will wait to see how markets react to tougher austerity measures demanded by the European Union before deciding on when to issue new state bonds, a government official said Tuesday.

EU Finance Commissioner Olli Rehn on Monday said the country must impose more painful, permanent spending cuts if it is to emerge from an unprecedented debt crisis that has shaken the EU's common currency.

The measures will be discussed and decided on during a Cabinet meeting Wednesday afternoon, and the government will wait to see how markets react to whatever decision is announced afterwards before issuing any bonds, government spokesman Giorgos Petalotis told the AP.

"We are waiting a bit to finish with the announcement of the measures ... and to judge the reaction of the markets," Petalotis said. He said no decision had been taken as to when the bonds would be issued, how much Greece will be seeking to raise in the sale or whether it will aim to sell five or 10-year bonds.

In January, Greece sold 8 billion euros ($11 billion) worth of government bonds in its first issue of the year, which was heavily oversubscribed despite concern over the debt crisis. It had initially aimed to raise 3 billion euros to 5 billion euros, and attracted a total of 25 billion euros in offers.

Greece plans to borrow some 54 billion euros through sovereign debt issues this year, and has so far raised around 13 billion euros, including Treasury bill sales. Some 20 billion euros worth of government bonds mature in April and May.

Socialist Prime Minister George Papandreou's government has already announced a series of austerity measures, including higher fuel taxes, salary freezes and bonus cuts for the public sector, and an increase in the average retirement age.

New measures could include more tax hikes and cuts in state workers' so-called 14th salary — part of annual pay held back as a holiday bonus. Unions, which have already held a series of strikes, have said curbing the 14th salary would be taken as "an act of war."

The new austerity measures are expected amid reports that officials in fellow European countries are preparing a financial rescue deal for Greece, to be finalized this week. Greek officials have refused to confirm these reports.

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