GREECE took another step towards the brink when it said its budget deficit would come in higher than expected, pushing Athens’ cost of borrowing to its highest level in a decade.
The government said 2009’s funding shortfall would probably rise to 12.9 per cent of GDP, up from the 12.7 per cent briefed previously. Markets took fright at the announcement and pushed the yield on 10-year Greek bonds to 7.13 per cent – a level not seen since October 1999.
The spread between Greek and German bonds shot up to 415 basis points, meaning Greece is now trading wider than Iceland for the first time on record.
A further shadow fell over the heavily indebted nation as it emerged Greek banks had asked for more emergency state support, following a haemhorraging of €8.4bn deposits since December. Around €17bn (£14.9bn) extra will be extended to the banks in the form of guarantees and bonds, on top of €9bn already issued.
Analysts said Greece will almost certainly need to call on the eurozone support package arranged last month. Elizabeth Afseth of Evolution said: “At the moment it doesn’t look like a very happy ending.”