ATHENS/LONDON – Greece said on Tuesday it expected a positive outcome at this week's European Union (EU) summit to its request for a European financial safety net despite Germany's insistence that aid would not be discussed. Finance Minister George Papaconstantinou said he was encouraged by comments from EU institutions about ways to support Greece's efforts to cut its huge budget deficit and public debt and reduce its borrowing costs. "Based on these statements, we expect a positive result tomorrow," he told an investment conference in Athens. "There must be a political mechanism to ensure the stability of the euro zone and support the efforts made by every country," he said, adding that data for the first two months of 2010 show Greek revenues rose and spending fell sharply. But there was no public sign that Chancellor Angela Merkel, facing massive public opposition to any bailout ahead of a regional election in May in which her centre-right coalition's upper house majority is at stake, was willing to relent. The risk premium that investors charge for holding Greek debt rather than German bonds narrowed after his comments to 327 basis points from around 344 at Monday's settlement close, although it was still above last week's levels. "The Greek Finance Minister's statement of higher revenues, lower spending and commitment to choosing a European solution to the country's debt crisis if at all possible, are all positive for Greek bonds and helping contract spreads over Germany," said a senior bonds trader in London. Greece needs to refinance some 16 billion euros in maturing debt between April 20 and May 23 and is hoping that a public display of an EU emergency support mechanism, which would not need to be activated, will be enough to force down the cost. The crisis over Greece's debt, expected to hit 120 per cent of national output this year, and its budget deficit, which reached 12.9 per cent of GDP last year, has shaken confidence in the euro single currency. The euro dipped further against the dollar yesterday as Germany and its EU partners continued to wrangle over whether euro zone countries need to agree on a fallback mechanism for Greece.
