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 a 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.
