Greece eyes extension of rescue loans, more bond issues

ATHENS Wed Apr 30, 2014 10:16am EDT

A man makes his way inside the reception hall of the Greek Stock Exchange in Athens April 10, 2014. REUTERS/Alkis Konstantinidis

A man makes his way inside the reception hall of the Greek Stock Exchange in Athens April 10, 2014.

Credit: Reuters/Alkis Konstantinidis

ATHENS (Reuters) - Greece will formally propose stretching the maturity of its international rescue loans from about 30 years to up to 50 as part of a push to make its debt sustainable, a senior Greek finance ministry official told Reuters on Wednesday.

Bailed-out Athens has qualified for more debt relief from the European Union and IMF after topping its budget targets last year and ending its four-year exile from bond markets this month, a sign that it is turning the corner after years of an austerity-fuelled economic depression.

Under the terms of a deal stuck in November 2012, the EU has promised to provide further debt relief to Greece on condition that it meets its fiscal targets. Talks will be held in the second half of this year.

"When the negotiations for Greek debt relief begin we will propose extending the maturities to about 50 years," the finance ministry official said, on condition of anonymity.

Athens will also propose lowering the interest rate on the rescue loans it has bilaterally received from euro zone countries, or alternatively switching them to fixed-rate from floating-rate, the official said.

The so-called GLF loans are worth 52.9 billion euros and euro zone countries are charging Greece three-month Euribor plus 150 basis points for them. Greece has obtained a total 237 billion euros in two EU/IMF bailouts since 2010.

FOOD HANDOUTS

Greece says it will not need a third bailout to cover a possible funding gap of at least 10 billion euros in the coming years. But euro zone lenders are more circumspect and say they are standing by to provide more help, if needed.

On Wednesday, Athens said it expected to beat its budget targets this year, with a primary surplus before interest payments of 2.3 percent of GDP.

Greece also said it may tap bond markets again in the next 12 months to raise between 3 and 6 billion euros after it raised 3 billion euros earlier this month with a 5-year bond.

According to the finance ministry official, any new bonds will probably have a maturity of below five years to plug gaps in the short-end of Greece's yield curve. Athens has no current debt with a maturity between six months and five years.

"To fix the yield curve, it would be better to tap markets with two small-sized issues worth up to 3 billion euros each with a maturity of one to three years," the official said.

Four years of tough austerity measures and six years of recession have wiped out almost a quarter of Greece's GDP, sending unemployment to record highs of nearly 28 percent.

The updated mid-term budget plan revealed on Wednesday sees Greek real GDP growing by an average 3.3 percent in 2015-2018, leading to an unemployment rate of 15.9 percent by 2018.

But many Greeks who have seen their living standards crumble have yet to feel the benefits of the recovery.

Hundreds lined up for free food handed out by protesting market stallholders in several working-class neighborhoods around the capital on Wednesday, jostling each other as they tried to seize bags of fruit and vegetables.

"We even saw people fainting in the commotion," the head of the farmers' market federation, Vassilis Makridis, told the Athens News Agency. The traders are on an indefinite strike against a bill outlining new operating rules.

(Additional reporting by Alkis Konstantinidis; Writing by Harry Papachristou and Karolina Tagaris; Editing by Gareth Jones)

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