Greece used EU and IMF emergency loans to fully repay a 10-year, 8.5 billion euro bond that matured on Wednesday, officials said, and now needs to make painful changes to revamp its economy.
It was Greece's perceived inability to redeem the looming May 19 bond that prompted the European Union and International Monetary Fund to come up with an 110 billion euro ($137 billion) emergency loan agreed at the beginning of this month.
"We have concluded the repayment of the 8.5 billion euro maturing bond," a bank official close to the deal said.
Though it has gained breathing space, Greece must now convince investors it can rein in its deficit so that it can eventually start borrowing on the market again.
"We had to take emergency measures to deal with our sovereign debt and our credibility issues. These measures are to give us time for deeper changes," Prime Minister George Papandreou told an energy conference in Athens.
The first 20 billion euro tranche of the EU/IMF aid was completed on Tuesday, but Greece still faces the huge task of reducing its deficit from nearly 14 percent of GDP to under 3 percent by 2014. Greek GDP is also shrinking and projected to contract by 4 percent this year, making the job even harder.
Papandreou has cut public sector wages and raised taxes in return for the EU/IMF aid. But he has faced a public backlash with large protests in the capital Athens and unions calling a general strike and another demonstration for Thursday.
Investors will be closely watching Thursday's strike and march for signs of whether the protests are gaining momentum, or whether Greeks will begin to shy away, especially after three bank workers were killed in the last big demonstration on May 5.
SHARING THE PAIN
Ahead lie more measures that will hurt many Greeks such as raising the age of retirement, further cuts to public spending and cutting red tape and freeing up competitiveness.
While public anger over the cuts is palpable, public opinion polls consistently show most Greeks agree with the necessity to make changes and Papandreou's personal popularity remains high.
What incenses most Greeks is their belief that the burden of the cuts is being unfairly shouldered by ordinary people while politicians and the rich remain relatively untouched.
Papandreou has promised a clean-up of corrupt politicians and sacked his deputy tourism minister this week, albeit only after an outcry in the press over revelations that her husband owed more than 5 million euros in unpaid taxes.
"We know there is pain and we are sharing the burden of this pain," Papandreou told the conference on Wednesday.
Though shut out of the markets for now, Greece will have to return sometime and aims to have restored investor confidence enough to do so by the end of 2011 or beginning of 2012.
While for now austerity is the order of the day, Greece has to attempt to stimulate growth if it is to eventually emerge from the crisis.
"It's a known fact that we will deal with this crisis not just by consolidating our budget but also with growth," Papandreou said.
"The crisis has given the Greek people great determination to say "never again" and "let's relaunch Greece", bring out the best that Greece has and leave the bad practices of the past behind us," he said.
Greece plans to tender 3.9 billion euros of construction projects by 2012, the country's transport and infrastructure minister said on Wednesday.
