Greek PM wins political praise, no market credit

Greek Prime Minister George Papandreou's whirlwind tour of Europe and the United States has won him political applause for austerity measures but failed to impress financial markets.

Warm words from US President Barack Obama and support pledges from French President Nicolas Sarkozy have not lowered Greece's borrowing costs, which are still too high for the cash-strapped country to sustain.

The premium investors charge to hold Greek 10-year bonds rather than German benchmark issues widened to 310 basis points on Wednesday when Papandreou ended his tour. That was the biggest spread since he began it six days ago meeting Euro Group President Jean-Claude Juncker and German Chancellor Angela Merkel last Friday.

"This was basically a public relations campaign to boost the image of Greece, whereas the prime minister's real work is to get the budget in order," said Peter Morici, business professor at the University of Maryland.

Narrowing Greek bond spreads will require specific action by the European Union and a restructuring of Greece's crushing debt load, analysts said.

"Given Greece's underlying position and the lack of any organized action on the part of the EU, I am actually surprised the bond spreads are that low" said Simon Johnson, a former IMF chief economist now at the Peterson Institute for International Economics.

"Greek spreads will only narrow if some state banks or quasi-government institutions come out and buy Greek bonds to support the market," said Ali Zulfiqar, managing director at New-York based research firm SGH Macro Advisors.