A Greek gamble to raise urgently needed money was judged a semi-success yesterday, as analysts warned that the debt-laden country is still at risk and the euro is likely to remain weak.
Athens raised €5 billion on Monday to cover debt maturing in April as it tested the markets four days after the European Union offered a safety net to stop a crisis hurting the euro.
But the seven-year bond offered by Greece received a lukewarm welcome as the interest rate that the government had struggled to lower from a threshold of just over six per cent barely budged.
And demand was disappointing compared to past five- and 10-year bond issues that were greatly oversubscribed, analysts said after Monday's release reportedly received offers of around €7 billion.
"This shows that Greece's problems are far from over," financial research firm Rabobank said in a note.
Greece has struggled to bring down the yield demanded by the markets for its bonds, as the rate it is asked to pay is twice that of Germany, and Athens hoped that last Thursday's EU-IMF contingency plan would ease pressure.
"Following the announcement of the plan of combined IMF payments and bilateral loans many had expected that the interest that Greece would have to pay for its national debt would fall notably. But this hope had turned out to be false," noted Commerzbank analyst Ulrich Leuchtmann.
"Long term the situation in Greece is getting increasingly worse unless yields fall. Rising interest rate payments would then at least partially undo the (possible) success of any savings measures in reducing the deficit," he said.
Although fears of a Greek default have been allayed in the short term, the euro is "likely to remain under pressure," Mr Leuchtmann added.
The Greek debt management agency said it had offered a coupon rate of 5.90 per cent on the seven-year bond, adding that the yield difference over German bond mid-swaps was 310 basis points. "We needed to go on the market urgently to draw funds (to meet) our loan needs for April and May given that markets shut down for around a week for Easter," Greek Finance Minister George Papaconstantinou told state television NET hours after the bond issue.
"Now we have passed the April hurdle and have only May to deal with," he said. Greece needs to borrow €11.5 billion in May, NET said.
The Socialist government has launched austerity measures which include pay cuts, a sales tax rise and a freeze in public and private sector pensions in order to reduce a public deficit that reached 12.7 per cent of output in 2009.
The measures have sparked two general strikes and street protests which unions warn will continue after the Easter break.
Greek media took a dim view of the latest loan-raising effort.
"New bond issue gets cool reception," said financial daily Naftemboriki, while left-wing Avgi jibed that the EU safety net was shown to be "hole-riddled".
Debt rating agency Fitch also voiced scepticism, noting in a statement that it was maintaining a negative outlook on Greece "because of continued uncertainty" over its medium-term economic and fiscal adjustment.