August 14, 2012
Greece successfully staved off a default on debts owed to the European Central Bank, as more information dribbled out on the parlous state of its economy and banking system.
The Greek economy shrank 6.2% year-on-year in the second quarter, European Union statistics agency Eurostat estimated on Tuesday, and senior bankers said more than 20% of loans to the domestic economy are now officially nonperforming. They warned that the problem may overwhelm the sector and derail the country's bailout program.
The news reinforced a growing impression in financial and political circles of a country surviving hand-to-mouth on a series of short-term fixes while its creditors deliberate whether to continue lending to it.
The Greek government addressed one of its most pressing issues by selling €4.063 billion ($5 billion) of 13-week treasury bills, as expected, mainly to domestic banks—its largest debt sale in two years.
Most of the money raised will go to redeem €3.1 billion in bonds held by the ECB that mature Aug. 20, avoiding a default that would have made it nearly impossible for Greek banks to carry on borrowing from the Eurosystem.
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