The last of the government’s three “roadshows” to potential foreign bond investors took place in Frankfurt yesterday, in the aftermath of accusations from opposition party DISY that “misleading” budget deficit forecasts from the Finance Ministry threatened the country’s credibility with the EU.
The government gave presentations to potential investors in Brussels, Zurich and Frankfurt on successive days this week in an effort to plug a growing gap in state revenues – the latest official figures show a €576 million shortfall – with at least €1 billion in the form of 10-year bonds.
This latest effort follows the hugely successful issue of €1.5 billion in 4-year bonds in May 2009, when the government received bids of €5.4 billion against the €1 billion sought. At that time, the Finance Ministry was forecasting growth of around 1.0 per cent of GDP in 2009, and a public deficit of between 2.0 and 2.5 per cent of GDP for the full year.
When the book on this week’s offering is closed, it will be clear to what extent it has been affected by much grimmer economic indicators, but also by the domestic row that erupted on Monday, when DISY Vice President Averoff Neophytou accused the ministry of “knowingly misinforming” the House of Representatives and the island’s whole financial system with widely-varying budget deficit forecasts.
Based on data up to December 18, 2009, the Finance Ministry had told the House that the deficit for the year would be below 3.0 per cent. On January 11, the ministry issued a forecast of 4.5 per cent, and last Tuesday, when the first roadshow was to be held, this was revised to 6.0 per cent in information provided to potential investors.
On Monday, Neophytou said: “You understand that when the House, the political parties and the European Commission receive assurances from the government’s economic team, a few days before the end of the 2009 financial year, that the deficit will be kept below 3.0 per cent, and then more recently we see the government issue memos covering the state’s needs for 2010, in which last week it referred to a 2009 budget deficit of 4.5 per cent, which it revised a few hours ago to 6.1 per cent, we have a major political issue here.”
On Wednesday, Neophytou said: “There is nothing worse than for the confidence of European institutions and foreign markets in the forecasts and data presented by the Cypriot state to be shaken.”
