UPDATE 2-Greece repays 8.5 bln euros, painful changes ahead

* Greece fully pays off 8.5 bln euro bond

* Time for deeper changes – PM says

(Adds prime minister, analysis)

By Lefteris Papadimas and Harry Papachristou

ATHENS, May 19 (BestGrowthStock) – Greece used EU and IMF emergency
loans to fully repay a 10-year, 8.5 billion euro bond that
matured on Wednesday, officials said, and now needs to make
painful changes to revamp its economy.

It was Greece’s perceived inability to redeem the looming
May 19 bond that prompted the European Union and International
Monetary Fund to come up with an 110 billion euro ($137 billion)
emergency loan agreed at the beginning of this month.

“We have concluded the repayment of the 8.5 billion euro
maturing bond,” a bank official close to the deal said.

Though it has gained breathing space, Greece must now
convince investors it can rein in its deficit so that it can
eventually start borrowing on the market again.

“We had to take emergency measures to deal with our
sovereign debt and our credibility issues. These measures are to
give us time for deeper changes,” Prime Minister George
Papandreou told an energy conference in Athens.

The first 20 billion euro tranche of the EU/IMF aid was
completed on Tuesday, but Greece still faces the huge task of
reducing its deficit from nearly 14 percent of GDP to under 3
percent by 2014. Greek GDP is also shrinking and projected to
contract by 4 percent this year, making the job even harder.

Papandreou has cut public sector wages and raised taxes in
return for the EU/IMF aid. But he has faced a public backlash
with large protests in the capital Athens and unions calling a
general strike and another demonstration for Thursday.

Investors will be closely watching Thursday’s strike and
march for signs of whether the protests are gaining momentum, or
whether Greeks will begin to shy away, especially after three
bank workers were killed in the last big demonstration on May 5.


Ahead lie more measures that will hurt many Greeks such as
raising the age of retirement, further cuts to public spending
and cutting red tape and freeing up competitiveness.

While public anger over the cuts is palpable, public opinion
polls consistently show most Greeks agree with the necessity to
make changes and Papandreou’s personal popularity remains high.

What incenses most Greeks is their belief that the burden of
the cuts is being unfairly shouldered by ordinary people while
politicians and the rich remain relatively untouched.

Papandreou has promised a clean-up of corrupt politicians
and sacked his deputy tourism minister this week, albeit only
after an outcry in the press over revelations that her husband
owed more than 5 million euros in unpaid taxes.

“We know there is pain and we are sharing the burden of this
pain,” Papandreou told the conference on Wednesday.

Though shut out of the markets for now, Greece will have to
return sometime and aims to have restored investor confidence
enough to do so by the end of 2011 or beginning of 2012.

While for now austerity is the order of the day, Greece has
to attempt to stimulate growth if it is to eventually emerge
from the crisis.

“It’s a known fact that we will deal with this crisis not
just by consolidating our budget but also with growth,”
Papandreou said.

“The crisis has given the Greek people great determination
to say “never again” and “let’s relaunch Greece”, bring out the
best that Greece has and leave the bad practices of the past
behind us,” he said.

Greece plans to tender 3.9 billion euros of construction
projects by 2012, the country’s transport and infrastructure
minister said on Wednesday.
Stock Investing

(Additional reporting by Angeliki Koutantou; Writing by Jon
Hemming; Editing by Toby Chopra)
($1=.8054 Euro)

UPDATE 2-Greece repays 8.5 bln euros, painful changes ahead