Investors Flock to Greece's New 10-Year Bond Offering

Greece launched a critical 10-year bond issue on Thursday, a day after winning approval from markets and the European Union for painful austerity measures designed to lift the debt-ridden country out of its financial crisis.

The bond was already oversubscribed — meaning more takers than there were bonds available — within an hour of the book opening, with 7 billion euros ($9.5 billion) in offers received. The government was seeking a maximum of 5 billion euros ($6.8 billion), said the chief of Greece's debt management agency, Petros Christodoulou.

The sale is a key test of Greece's ability to raise money to pay off expiring bonds and avoid the risk of default.

The announcement of the issue comes a day after debt-ridden Greece detailed a whole new round of pain austerity measures, including salary cuts for civil servants, pension freezes and tax hikes on cigarettes, alcohol, luxury goods and gems.

The measures were aimed at showing markets that the government is serious about getting spending under control and will have the money to pay its debts.

Greece has to borrow some 54 billion euros ($7.4 billion) through sovereign debt issues this year, and has so far raised around 13 billion euros ($18 billion), including Treasury bill sales. But low market confidence in the country has translated into extremely high borrowing costs for Athens, and the government has been seeking for a way to borrow at more reasonable rates.

Greece is pressing its European Union partners for stronger support in return for its new harsh austerity plan, saying it needed a vote of confidence that would calm the markets.

Prime Minister George Papandreou is to meet with German Chancellor Angela Merkel, whose country has the 16-nation euro zone's biggest economy, in Berlin on Friday, and with French President Nicolas Sarkozy in Paris on Sunday.

The European Union has made a vague expression of support, and there has been market speculation that Germany and France might extend help in the form of state-owned banks guaranteeing Greek bonds.

Many analysts think the EU would step in to stop a Greek default and avoid the severe blow it would cause to the euro currency and to the balance sheets of European banks that hold Greek bonds.

"What we expect from our EU partners and above all Germany — because Germany's voice is a particularly important one in this context — is a clear expression of solidarity and confidence" in the Greek government and its new austerity plan, Deputy Foreign Minister Dimitris Droutsas told Germany's ARD television.

Droutsas stressed that "the Greek government at no point demanded or asked for direct financial support from its EU partners or, naturally, from Germany."

"We are of the opinion that we can master this crisis alone," he said. "What we need is a really strong expression of solidarity."

Germany has stressed repeatedly that Greece bears the main responsibility for overcoming its debt crisis. Merkel welcomed the deeper austerity measures Wednesday, but stressed that her meeting with Papandreou would "not be about pledges of aid."