ROUTERS- Greece was encouraged by short-term borrowing on Tuesday, when it kicked off monthly sales of T-bills, with foreigners picking up 30 percent of the offer, up from 15-20 percent usually, officials said, although the average yield on six-month paper was 4.82 percent.
Greece plans “diaspora” bonds to tap Greeks abroad
* Expects to return to capital markets in 2011: finance min
* Minister says public understands necessity of policies
* Greece will meet deficit target this year
(Adds analyst comment, minister quotes)By Jeremy Gaunt and George Georgiopoulos
LONDON/ATHENS, Sept 15 (Reuters) – Greece plans to sell bonds to Greeks abroad as it eyes a return to international bond markets some time next year, the country’s finance minister said on Wednesday.
Greece is keen to return to markets after plunging into a debt crisis last year, when its budget deficit hit 13.6 percent of GDP, driving borrowing costs to prohibitive levels and prompting a 110 billion euro ($140 billion) bailout from the International Monetary Fund and European Union.
“We are talking at the moment and designing what is called a ‘diaspora bond’ to tap Greek money that is abroad and we feel that we will be quite successful,” Finance Minister George Papaconstantinou told Reuters Insider TV.
“I think markets are clearly pricing us in a way that is not really in tune with where we are. It’s interesting to see that yesterday’s T-bill auction went well,” said Papaconstantinou, in London on a European roadshow to meet investors and persuade them of Greece’s commitment to meet debt reduction targets.
“If we did not have the T-bill auctions … we would have to be borrowing from our creditors (IMF/EU) at 5.0 percent. Anything below that for us is useful,” he added.
DIASPORA QUESTIONS
Analysts said details were needed to see what amount Greece could raise from a diaspora bond and what would make it more attractive than other Greek debt offerings.
“It would need to be made clear what benefit Greek expats would gain by buying these bonds as opposed to existing Greek government paper in the secondary market,” said Miranda Xafa, senior strategist at IJ Partners, an asset management firm based in Geneva. “Will they be trying to appeal to their patriotism or will there be a tax advantage?”
Government officials said the diaspora bond was still in the planning stage and details had not been decided yet.
“Every little thing helps,” said Kornelius Purps, an analyst at Unicredit in Munich. “(But) with Greek debt we are always talking of billions; it is more important to convince those who really have the money, European institutional investors, to purchase Greek debt instead of individuals.”
Papaconstantinou said financial markets remained cautious on Greece and were just beginning to believe it would stay the course of fiscal consolidation and continue to implement reforms after seeing some first results.
Greece managed to slash its budget gap by 40 percent year-on-year in the first half but the pace slowed in the following three months on weak revenues as the economic downturn deepened.
“We have cut 7.0 billion (euros) of our previous deficit. We are on target to cut 12 billion euros by the end of the year. We are hitting all targets,” Papaconstantinou said.
He again ruled out default and vowed to stay the course on the big changes in the Greek economy — pension and labour markets, opening up closed professions, reforming the tax system, cracking down on tax evasion.
Papaconstantinou said public protests, although sometimes violent, have been smaller than in other countries as people realise tough measures are necessary.
“The Greek public understands perfectly well that what is being done is absolutely needed. It is difficult, it is often harsh, people are hurting, however, in the situation that we were in and to avoid bankruptcy we have to take the decisions we are taking,” he said. (Writing by Dina Kyriakidou; Editing by Ruth Pitchford)
