Greece enjoys debt sale success

image captionGreece faces a long walk out of financial struggle

Greece has successfully sold government bonds in its first attempt since the huge EU-IMF loan bail-out was launched in early May.

It had sought to raise 1.25bn euros (£1.05bn; $1.58bn), but the offer was oversubscribed, with bids totalling 3.6bn euros.

Greece must repay the bonds after six months, with a return rate of 4.65%, which is lower than IMF loans.

The controversial bail-out package is worth 110bn euros over three years.

However, payments are on condition that Greece slashes public spending and boosts tax revenue.

'First steps'

Greece abandoned plans to sell 12-month bonds, which would probably have been seen as riskier.

Analysts said that because the bonds sold had a very short maturity, the sale was not a good indication of how much faith investors had in Greece's long-term prospects.

"It is important that Greece returns to money markets, but the real, hard test will be only when it sells debt with a maturity extending beyond the EU/IMF programme, beyond 2012," said Jens-Oliver Niklasch, bond analyst at LBBW.

"Conditions are not ripe yet for such a step... one has to see how the general government deficit develops.

"Greece has lost a lot of confidence with financial markets and it will be a long way to win it back. Today's auction was one of the first steps, but it doesn't say much in terms of what is going to happen next."

The auction came hours after Portugal's sovereign debt rating was downgraded by Moody's in a further blow for the eurozone.

This made the over-subscription for Greek debt a "good result", said Costas Boukas, head of asset management at Beta Securities.

"It is a vote of confidence for the measures taken by the government. Greece has an open window to exit crisis."

Austerity measures already announced include raising the retirement age, cracking down on tax evasion and ending public sector bonuses.

The aim is to slash the budget deficit from 13.6% of gross domestic product (GDP) to below 3% by 2014. The EU's stability pact sets 3% as an EU-wide maximum for deficits.

But the harsh measures have already triggered a wave of public sector strikes and violence on the streets of Athens.