Bonds News

UPDATE 2-Greek PM says won't seek IMF aid, poor not to suffer

* PM says Greece won’t quit euro zone or resort to IMF

* Poor to be protected, no VAT hike

* IMF team in Athens to advise on fiscal problems

* Greek 10-year bond spread at highest since late December

(Adds more Papandreou quotes)

By Dina Kyriakidou and Harry Papachristou

ATHENS, Jan 13 (Reuters) - Prime Minister George Papandreou said on Wednesday Greece will not quit the euro zone or seek help from the IMF, but promised that the deeply indebted country’s fiscal reforms would not hurt the poor.

“There is no case of Greece leaving the euro zone or resorting to other kind of help, such as the IMF,” Papandreou told a news conference to mark the socialist government’s first 100 days in office.

Papandreou said Greece wanted to establish a sense of trust and certainty among its creditors, and Greeks were not just ready but avid for change and for things to move forward.

However, he gave a warning about the fairness of the fiscal measures Greece would adopt.

“It would not be a courageous measure to make the poor and wage-earners pay -- this is not our policy,” he said.

“Some bankers or others abroad may like it, but I have said that we are going towards a different model.”

“We have said that those who have more will pay more, including the banks,” said Papandreou who also said there would be no increase in value-added tax.

International Monetary Fund experts met Greek officials on Wednesday to advise on fiscal problems, as the premium on the country’s debt rose to its highest level since late last month.

Greece’s new socialist government will discuss at a cabinet meeting on Thursday a plan to cut the deficit from 12.7 percent of GDP in 2009 to under 3 percent in 3 years.

Pressured by markets and its EU peers, Greece is drafting a fiscal consolidation roadmap to bring its bloated budget deficit under the European Union’s 3 percent cap and convince markets it will do what it takes to get out of a fiscal crisis.

Papandreou said there had been “foul play” with the country’s statistics, adding that a parliamentary commission may be set up to investigate the matter.

Greece’s EU partners were outraged to learn from the new government soon after it took office that the previous conservative administration had grossly underestimated the size of the holes in the country’s finances, with the 2009 fiscal deficit not 3.7 percent of GDP but a massive 12.5 percent.

The premium investors demand to hold 10-year Greek government bonds GR10YT=RR over euro zone benchmark German Bunds GR10YT=RR widened to 256 basis points EU10YT=RR versus around 236 bps in late European hours the previous trading day.

The spread, which had been widening all session, grew further after Papandreou’s comments ruling out an appeal to the IMF or departure from the euro zone.

The country’s socialist government, which took over in October, has asked the IMF for expert advice on fiscal matters.

The IMF team first met on Wednesday with Finance Minister George Papaconstantinou to offer expertise on budgeting, tax policy and ways to better monitor government spending, the finance ministry said.

“The meeting took place after an invitation by the Finance Ministry, which asked for the IMF’s input on technical matters,” it said in a statement.

Greece’s self-styled stability programme to cut a double-digit budget deficit to under 3 percent of GDP in 3 years will be submitted to the EU Commission by early next week.

Financial markets want to see concrete policies to tackle fiscal imbalances and the EU executive has asked for more quantifiable measures.

The country’s first auction of T-bills this year saw yields spike on Tuesday, providing no let up from the high borrowing costs that are putting a strain on Greece’s budgets.

Moody’s, which in December cut Greece’s debt to A2 with a negative outlook, said on Wednesday that this downgrade reflected its view that, while the government recognised what measures were needed to address longer-term vulnerabilities, their implementation would be challenging. [ID:nLDE60C0JU]

Danish Finance Minister Claus Hjort Frederiksen on Wednesday added to EU policymakers’ harsh criticisms of Greek statistics.

“It is very dissatisfying that Greece has several times put forward figures that later have proven to be entirely misleading,” he told Reuters. “This is very unacceptable.”

An EU source said on Tuesday the European Commission was likely to take legal steps against Athens over its unreliable reporting of statistics. [ID:nLDE60B0WN] (Additional reporting by George Georgiopoulos and Lefteris Papadimas in Athens; writing by Ingrid Melander; editing by Stephen Nisbet)