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Greece Borrowing Rates Hit New Record

Greek bond yields hit another record high Monday amid a broader flare-up in Europe's debt crisis and despite better than expected deficit reduction figures.

Macduff Everton | Ironica | Getty Images

The 10-year bond yield exceeded the equivalent German yield by 10 percentage points for the first time, only a day before a euro1.5 billion ($1.96 billion) auction of 6-month treasury bills - considered an important test of market sentiment.

Greece has launched a major effort to cut borrowing costs in exchange for bailout loans worth euro110 billion from the IMF and other countries using the euro.

The government says it wants to return to long-term bond markets sometime this year.

But the interest gap, or spread, on 10-year bonds compared with the German issue reached a worrying 1,001.1 basis points amid renewed worries about some EU nations' fight to handle heavy debt loads.

Greece's Socialist government is struggling to push through reforms demanded by bailout-loan inspectors that are meant to replace drastic one-off spending cuts and emergency tax measures with longer-term fiscal improvements.

On Monday, the Finance Ministry said provisional data showed the deficit was cut more than expected in 2010.

The deficit amounted to euro19.6 billion, down from euro30.87 billion in 2009. That amounts to a reduction of 36.5 percent, exceeding the 33.2 percent target.

Net revenue gains were below target, however, with a 5.5 percent increase compared with 2009 missing the goal of 6 percent, according to ministry figures.

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