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Greek borrowing costs hit new record high, despite successful T-bill auction
ATHENS, Greece (AP) ' Debt-crippled Greece's borrowing costs reached a new record high Tuesday on fears about the country's austerity program, a new blow as Prime Minister George Papandreou chaired a cabinet meeting aimed at finding ways to speed up delayed structural reforms.
The interest rate on Greek 10-year government bonds was about 20 percent ' some 18 percentage points above the rate for the benchmark German bonds of the same maturity. The borrowing rates of troubled fellow eurozone countries Italy and Spain also came under pressure Tuesday.
Extravagant borrowing costs forced Greece out of international bond markets last year, and the country now relies on international loans to keep solvent.
However, Athens still holds short-term debt auctions and was able to raise euro1.3 billion ($1.8 billion) Tuesday in an auction of 26-week treasury bills at a slightly lower interest rate than a similar sale last month.
The debt management agency said the auction was three times oversubscribed and resulted in a yield of 4.80 percent.
A government official said Papandreou discussed needed structural reforms during a phone call with European Council President Herman Van Rompuy.
"There was an agreement that these reforms need to be implemented soon," he said.
A new batch of measures adopted by Parliament in June ' as tens of thousands of Greeks protested outside and severe riots raged ' included further cuts in the public sector's size and cost, closures and mergers of state enterprises and an ambitious plan to sell euro50 billion ($70.5 billion) in state assets by 2015.
But there has been little noticeable progress, while previously decided reforms such as the opening of tightly regulated professions, are still lagging.
"The government is determined to move forward," the government official told journalists. "We will push forward the reforms at a very intense pace." The official spoke on condition of anonymity because the cabinet meeting had not yet started.
After living beyond its means for years and piling up a mountain of debt in the process, Greece just avoided bankruptcy last year through a euro110 billion ($155 billion) rescue loan package from its European Union partners and the International Monetary Fund.
The realization that even that would not be enough amid a shrinking economy and a malfunctioning state revenue collection system resulted in a second bailout in July, worth an extra euro109 billion ($153.7 billion).
Continued release of the vital funds ' any substantial delay could force Greece to default on its debts ' depends on the government's progress with reforms and deficit-cutting measures.
But talks with EU and IMF inspectors were unexpectedly suspended last week for 10 days, to let Greece complete what the EU said was "technical work, among other things, related to the 2012 budget and growth-enhancing structural reforms."
The government official was optimistic Tuesday that there will be no hitch with rescue loan payments.
"We do not believe there is an issue with the sixth installment" worth euro8 billion ($11 billion), he said.
Elena Becatoros in Athens contributed.