Greece says may retire some debt with selloffs

Greece could use some proceeds from its state divestments programme to buy back outstanding bonds in the market and retire some of its debt, the country's finance minister said on Wednesday.
Greece, which was downgraded further into junk territory by Standard & Poor's on Tuesday, has agreed with the EU and the IMF to substantially raise its privatisation targets as part of efforts to shore up its public finances after seeking an EU/IMF bailout last year.
It wants to divest stakes in railways, water utilities, real estate to raise 50 bln euros within the next five years, starting with 15 bln euros in 2011-2013.
"If we have significant amounts (of proceeds) from the privatisations programme, we may be able to buy back some debt," Finance Minister George Papaconstantinou told Real FM radio.
"But let's not think that buying back debt is a panacea. The (debt) problem is complex, cannot be solved with one tool but with many," he added.
Papaconstantinou did not say how much of the proceeds would be used to buy back bonds and retire debt, nor did he indicate whether the government was ready to speed up the privatisation programme. He said Greece received three significant tools to deal with its debt load at the euro zone leaders summit earlier this month — an extension of the payback period on the 110 bln euro EU/IMF bailout, a reduction in the interest rate charged and the ability to sell new bonds directly to the European Stability Mechanism (ESM).
Standard & Poor's, however, on downgrading Greece's credit rating by two notches to BB-minus on Tuesday, said that an agreement by euro zone leaders last week to create a permanent bailout fund for the euro zone increased the likelihood of debt restructuring by Greece. The plans would undermine Athens' plans to resume commercial borrowing by mid-2013, it said.
Papaconstantinou acknowledged on Wednesday that Greece's budget deficit last year was probably higher than an official estimate of 9.4% of GDP. Press reports on Tuesday said the 2010 deficit may have topped 10% of GDP due to revisions of pension fund fiscal accounts.
"Let's not underestimate the sacrifices of Greek people, we started with a deficit near 15.5% of GDP. We will find out the 2010 deficit from the statistics service (ELSTAT), I cannot make estimates, most likely it will be higher than 9.5%," he said.
A higher budget gap last year would add to the government's fiscal challenges and necessitate corrective measures to make up for the shortfall on top of some budget slippage already evident in the first quarter.
Papaconstantinou said Greece had passed the worst point of the recession and must stay on course with reforms and fiscal consolidation to return to growth.
The 230 bln euro economy slumped 4.5% last year and is projected to contract 3% in 2011.