Greek Deputy Foreign Minister Dimitris Droutsas called on Thursday for Germany and its EU partners to send a clear message of confidence in Athens to financial markets, allowing Greece to borrow more cheaply.
Droutsas also said he was optimistic that his government's extra austerity package aimed at fighting the nation's debt crisis would allow its 2010 budget deficit target to be met.
Greece did not need direct financial support from other European countries, he stressed.
"What we need from our EU partners and from such an important EU partner as Germany, is an explicit, clear signal to the international financial markets that Greece and the Greek government have their full confidence," he told Deutschlandfunk radio.
Greece needs to borrow or refinance some 53 billion euros this year, including 20 billion between April 20 and end May, but its borrowing costs would be cripplingly high due to a lack of confidence in the government's effort to get the huge deficit under control.
Prime Minister George Papandreou, who will meet German Chancellor Angela Merkel in Berlin on Friday, announced 4.8 billion euros in extra austerity measures on Wednesday.
Droutsas noted that with current interest rate premiums, Greece would have to pay 750 million euros more in interest on a five billion euro loan than Germany would.
"We're trying to bring these borrowing costs down and for this we need the trust of the international financial markets. We're earning this with these measures which we have announced," he said.
Markets are poised for a possible 10-year syndicated bond issue from Greece, and the yield on 10-year German government bonds is just over three percent, whereas on the Greek equivalent it is around 6 percent. <GR10YT=RR><EU10YT=RR>
Droutsas noted that the government aimed to reduce the budget deficit to 8.7 percent of gross domestic product this year from 12.7 percent in 2009.
NO DIRECT SUPPORT
"We are very optimistic that with the right implementation of this package of savings measures we can reach this target in 2010. That is our obligation and something that the Greek government is undertaking very seriously," he said in the interview, speaking in German.
"At no time has the Greek government demanded direct financial support from its EU partners. This is not necessary, Greece doesn't need it. We can, we want to clear up our state budget on our own," he added.
European government sources have said Germany and France are working on contingency plans under which state-owned financial institutions would directly purchase billions of euros in Greek bonds or offer guarantees to commercial banks that bought them.
The EU — and Germany — praised Greece's third savings package in as many months and said Athens could count on European solidarity. But Merkel, whose backing for any European safety net for Greek borrowing would be vital, has stopped short of any commitment to financial support. [ID:nLDE6220NA]
The yield spread between 10-year Greek and German bonds tightened to as low as 279 basis points after Papandreou announced the package on Wednesday from 305 bps at Tuesday's close, as yields on Greek bonds fell temporarily below 6 percent for the first time since mid-February.
