WRAPUP 1-Greece to raise more funds in bond market

* Greece to issue another bond in February

* IMF chief says Greece needs political will to change

By George Georgiopoulos and Lefteris Papadimas

ATHENS, Jan 26 (BestGrowthStock) – Greece decided on Tuesday to tap
debt markets again in February, encouraged after its first debt
issue of the year soothed market concerns about its ability to
ride out its worst economic crisis in decades.

Taking advantage of the tailwind of Monday’s eight-billion
euro bond issue, Greece promised another bond in February,
reassuring markets it can raise funds as it takes unpopular
steps to cut a huge budget deficit that has weighed on the euro.

“Having passed the first test is a precedent,” said a senior
banker in Athens. “A second successful sortie will help boost
confidence.”

The head of the Greek Public Debt Management Agency, Spyros
Papanicolaou, told Reuters the country planned a 10-year bond in
February, of up to five billion euros. “The final amount will be
determined by the market response,” he said.

The new Socialist government, which inherited a fiscal mess
that has hit Greece during its first recession in 16 years,
cheered investors’ demand for the bond sold on Monday — which
at 25 billion euros ($35.35 billion) was equivalent to nearly
half the country’s full-year financing needs.

But while giving the country a funding respite, the bond was
priced at a large price premium — at a yield of 6.2 percent
compared to a similar bond issued in April at 5.5 percent — and
officials were quick to point out fiscal problems remained.

The head of the International Monetary Fund, Dominique
Strauss-Kahn, said on Tuesday that the Greek economy is at a
“crucial crossroads and needs to restore its credibility”.

“All depends on the political will,” he said. “I am
confident that the Greek economy’s current crisis can be
overcome, but with deep changes at all levels.”

The European Union and rating agencies have raised pressure
on Greece to get its house in order but analysts fear efforts to
do so could be undermined by social opposition.

The government has launched a plan to cut the budget deficit
to below 3 percent of gross domestic product by the end of 2012
from 12.7 percent last year through welfare cuts, tax reforms
and savings on public sector wages.

POLITICAL WILL TO CUT SPENDING?

Both of the country’s main public and private sector unions
plan strikes in February and farmers have protested for more
than a week, blocking roads and border crossings to EU fellow
member Bulgaria, demanding higher prices for their produce.

The euro has been undermined in recent weeks by Greece’s
debt problems, as it has thrown the spotlight on other weak euro
members such as Portugal, Ireland and Spain.

European Central Bank Executive Board member Juergen Stark
warned on Tuesday that high public deficits could bring further
ratings downgrades of euro zone countries. Rating downgrades in
recent months have weighed on markets in markets such as Spain
and Portugal.

“In some countries 2009 deficits are expected to be in
double digits,” Stark said in a speech at a real estate sector
conference. “Thus, further country ratings and further negative
reaction in the financial markets cannot be excluded.”

Investors are closely watching Portugal’s government as it
announces on Tuesday steps to cut its budget deficit when it
presents its 2010 budget bill [LDE60E1ZK].

Greece’s problems have led some analysts to voice concerns
that the kind of pressure Greece has faced in financial markets
in recent days could ultimately lead to strains that might break
up the euro zone.

But OECD chief Angel Gurria said on Tuesday he believed that
would not happen and market pressure on Greece would ease.

“No, I don’t see that danger,” he said, when asked about
strains leading to a break up of the euro. “There are no
conditions that could justify that assumption.”

The euro bounced on Monday after Greece’s debt auction but
was lower on Tuesday as investors moved out of the euro after
China implemented a planned increase in required reserves for
some banks, unnerving investors.

Greek markets were also lower on Tuesday after rising on
relief from Monday’s bond issue. Greek banking stocks (.FTATBNK: )
were 2.6 percent lower while the premium demanded to hold its
10-year bond compared with German Bunds was up at 301 basis
points.

Investment Research

WRAPUP 1-Greece to raise more funds in bond market