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The interest rate on quarterly government bonds which the Greek government emitted this week reached 4.1% percent disappointing local economic analysts. All hoped its value will not pass the psychological barrier of 4% showing thereby that international markets value the efforts of the local government to change the course of the economy in 2010.

Short-term bonds were worth 500 million euros and the government earned 650 million euros from the trading. The interest rate had the same value as the last trading of quarterly bonds in November 2010.

According to the information of the Public Debt Management Agency, bids reached total of 2.49 million euros which covers 4.98 times the amount required. These levels are also known from the last similar bid held last year. Petros Christodoulos who is president of the institution told Reuters that 80% of the investors interested in the Greek bonds are foreigners, but the organization has accepted non-competitive bids amounting to 150 million euros.

The bid was held by primary dealers and the deadline is Friday, January 21, 2011. Additional non-competitive bids may be placed until 12 o’clock on Thursday, January 20 and may reach 30% of the total accumulated value. The Public Debt Management Agency stressed that no delay will be allowed.  

It became clear at the same time that the credit rating agency Fitch lowered the credit rating of five major Greek banks. The credit rating of National Bank of Greece, Alpha Bank, the Eurobank EFG, Piraeus Bank and ATEbank (Agricultural Bank) was reduced in the long run from BBB to BB+ and in the short run from B to F3, the outlook being negative. Financiers estimate that the lowered credit rating of the five banks is not really important and it will not affect their funding from the European Central Bank.

Some analysts associate the lowering of the credit rating of the banks with the macroeconomic situation in the country which currently has no access to free funding from international markets.

Chris Price – the analyst of Fitch – said to Bloomberg that Greece’s opportunity to return to the markets was very important. He explained that the credit rating agency would have revised the current assessment if Greece succeeded to make investors believe it was able to return to the free funding market till the beginning of 2012 as was the initial plan of the government after the adoption of the financial support.

The financial expert stressed that they would like to see any signs of Greece’s returning to the markets at the end of this year. If there are no such signs they would certainly reassess the ratings. In other words, if the government of George Papandreou do not convince foreign investors that it is able to cope with the domestic crisis and effectively reduce the budget deficit interest rates on ten-year government bonds also known as yield spread will not fall and the free funding will remain impossible dream for Greece.

There, however, remains the external debt issue that is constantly increasing in the period of reforms and recession. Chris Price also said the euro zone was expected to continue to exist in the same form and with the same members as now. He added that this did not mean that one or two members of the zone could not restructure their external debts referring to Greece and Ireland. Price stressed that they rather could do this.

Scenarios for the restructuring or at least rescheduling the Greek external debt became more frequent lately and many financial analysts recommend this to be done as soon as possible. However, the government strongly denies such a course but does not exclude the possibility to resort to rescheduling the repayments of the financial support of 110 billion euros.

It became clear after the last meeting of Ecofin that the loan under the Memorandum of economic support will be rescheduled but it will become clear under what conditions not earlier than March 2011. Until then the parliamentary spokesman George Pedalotis will continue to hold the current course: "There is no rescheduling of debt payment. The government does not discuss anything like that."