Greek PM Says Borrowing Costs Not Sustainable

Greek Prime Minister George Papandreou said on Friday that current spreads in Greek bond yields over those of other euro zone states were not sustainable in a monetary union.
"We are in an incomplete...economic union which does not have all the tools to deal with the wider issues. The most simple one, which every Greek understands, is 'spreads'", he told a meeting of center-left politicians in Oslo.

He said that borrowing rates were far higher than those of Germany and many other European countries.

"That is not sustainable in a monetary union," he said.

European Central Bank Governing Council member Ewald Nowotny earlier said Greece seemed not to have met the terms of its international rescue package recently. Euro zone finance ministers meet on Monday although a resolution on the Greek crisis is not anticipated.

"Greece has apparently not fulfilled the conditions sufficiently of late. The issue of privatizations will be the most sensitive point here," Austria's Kronen Zeitung quoted him as saying.

It appeared to be the first public confirmation that a joint inspection team from the ECB, the European Commission and the International Monetary Fund now in Athens has found shortcomings in Greece's implementation of its bailout program.

On Thursday, Greek government sources told Reuters the troika inspectors were pressing Athens to slash public spending further to make up for a likely shortfall in revenue this year.

"They are forming an opinion that there are difficulties," said one senior government official who requested anonymity. "They are concerned there is a high risk revenue targets will not be met and are pressing for more spending cuts."

At stake is a 12 billion euro tranche of aid due next month and key to paying 13.7 billion euros of immediate funding needs. Without it, Greece could effectively default.

A senior EU source involved in crisis management in the euro [EUR=X  1.411    -0.0129  (-0.91%)   ] zone debt crisis told Reuters Greece would have to commit itself to taking additional measures this year to ensure it meets its targets.
He also said European partners needed to see a breakthrough in Greece's stalled privatization program so the country can raise more funds by offering those assets, or securitized future revenues, as collateral for future loans.

Euro zone finance ministers would receive the inspectors' report at the end of May and were likely to take decisions on the next steps for Greece in June or more probably July, given the time needed to secure agreement among multiple stakeholders and ensure broad political support in Greece, he said.

Greek ministers have acknowledged that Athens is unlikely to be able to return to capital markets to raise 27 billion euros next year, as foreseen in its EU/IMF program, or a further 38 billion euros in 2013.

The EU source said most of the funding shortfall would have to be raised through collateralizing or securitizing the proceeds of privatization, with the rest coming from the euro zone and the IMF.

Greece is seeking a further extension of maturities on its 110 billion euros in rescue loans and a further cut in the interest rate on euro zone lending, which was reduced by one percentage point in March.
taken from http://www.cnbc.com/id/43018303