Tagged: Greece woes

Greece rating cut, deficit worse than feared

Reuters | Thu Apr 22, 2010 | 9:36pm IST

Greece’s budget gap last year was worse than feared, the European Union’s statistics office revealed on Thursday, as Moody’s Investors Service downgraded its rating of Greek government debt. The news triggered a fresh slide of asset prices in Greece and other debt-choked European countries, and increased pressure on Athens to seek billions of euros of emergency loans from the EU and the International Monetary Fund. Greece will need to refinance 8.5 billion euros of bonds maturing on May 19, and as soaring yields make it ruinously costly for Athens to issue bonds, investors think it may need a bailout to avoid defaulting or restructuring its debt. "It looks like a terrible situation just got worse," said Nick Kounis, economist at Fortis.

The budget figures were announced as tens of thousands of Greek nurses, teachers and other public workers staged a one-day strike to protest against the government’s austerity measures. They demanded that Athens reject any pressure for further spending cuts in crisis talks that it launched this week with the EU and the IMF. The Greek government posted a budget deficit of 32.34 billion euros or 13.6 percent of gross domestic product in 2009, not the 12.7 percent which it had reported earlier, Eurostat said in a review of countries’ deficits throughout the region. It added that the Greek deficit might be revised again, by between 0.3 and 0.5 percentage points of GDP, because of uncertainty about the quality of Greece’s data and accounting procedures. In a brief statement, the Greek Finance Ministry insisted the new numbers would not change its intention to shrink the deficit by four percentage points this year. It said measures already taken would be enough to cut the deficit by six points.

BACKING AWAY FROM TARGET

But both Athens and EU officials appeared to be backing away from a previously announced target for Greece to slash the deficit to 8.7 percent of GDP this year. "The target for 2010 is a four percentage point reduction of the deficit. We did not refer to the starting point or the arrival figure, only the reduction effort,"  

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Stocks Fall in Europe, U.S. as Greek Debt Swaps Jump to Record

Bloomberg | April 21, 2010 | 09:13 EDT

Stocks fell in Europe and index futures slipped in the U.S. as the cost to insure against Greece defaulting on its debt surged to a record. Technology companies rallied after Apple Inc. beat earnings estimates. The Stoxx Europe 600 Index retreated 0.3 percent at 9:11 a.m. in New York, while futures on the Standard & Poor’s 500 Index slipped 0.1 percent. Credit-default swaps on Greece surged 31 basis points to a record 495. Contracts on Portugal jumped 27 basis points to 228 and Spain climbed 16 to 161 basis points. Greek 10-year government bonds dropped for a seventh day, pushing the yield above 8 percent.

Greece began talks today on activating a 45 billion-euro ($61 billion) emergency aid package as the International Monetary Fund called the country’s fiscal crisis a “wake-up call” on sovereign-debt risks. The government needs to raise about 10 billion euros before the end of May, and its soaring financing costs are lending urgency to the talks.   

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Markets hit by Greek debt fears

BBC NEWS | 2010/04/08 | 21:30:13 GMT

European financial markets have been hit by renewed fears over the state of Greece’s debt-ridden economy. Banking stocks in particular, both in Greece and other European countries, have seen sharp falls. Meanwhile on the bond markets, the Greek government’s cost of borrowing has risen to record levels. This reflects investors’ concerns that loans to Greece might not be paid back due to the poor state of the country’s public finances. The Athens Composite index fell by 3.1%, with banks down 6.4% on average. All major European markets also suffered, with the UK’s FTSE 100 index down 0.9%, Germany’s Dax slipping 0.8% and France’s Cac 1.2% lower. Banks in France and Germany were also hit due to their exposure to Greece, with Societe Generale losing 3.1% and Commerzbank down 2.8%.

Fresh doubts

Greece is currently faced with debts of nearly 300bn euros (£267bn, $407bn), and is currently running a budget deficit equivalent of 12.7% of GDP. Its recovery plan involves borrowing on the bond markets and a harsh programme of spending cuts and higher taxes. But on Thursday, the yield on Greek government debt hit a new high of 7.5%, a full 3% higher than in October last year. The yield is the interest rate the government has to pay on its bonds to attract investors. The closely-watched difference between the yield on Greek debt and German debt – which has the lowest rate in the eurozone – also hit a fresh high. This reflects the doubts among investors that the Greek government can succeed in its plan to slash its deficit, and makes it more likely that the state will turn its eurozone partners for help.   

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Greek Default Unavoidable Without More Aid, Jen Says

Bloomberg | April 7, 2010 | 09:49 EDT

Greece may default on its debt as early as this year without “extraordinary” financial assistance from the European Union and International Monetary Fund, said Stephen Jen at BlueGold Capital Management LLP. The challenges facing Greece are similar to those that confronted Argentina, which defaulted on $95 billion of debt in 2001, as the government enacts austerity measures to narrow the European Union’s biggest budget deficit, Jen, managing director at the hedge fund, said today in an interview in London. That may drive the Mediterranean nation into a recession, he said. “A default may be ultimately unavoidable,” Jen said. “That eventuality may only be postponed by aid many times bigger than the 25 billion euros ($33 billion) people have in mind.” Any assistance needs to “impress the market,” he said.

Greek bonds fell for a second day, driving the premium investors demand to hold 10-year securities instead of benchmark German bunds to 407 basis points, the most since 1998. Market News International said yesterday the country wants to bypass IMF involvement in any EU-sponsored rescue because terms for aid would be too stringent. A Greek government spokesman denied the nation aims to exclude the IMF. Today’s declines pushed the yield up 12 basis points to 7.15 percent as of 2:48 p.m. in London. The spread averaged about 65 basis points in the five years through November before concern deepened that the country’s deficit would swell.    Continue reading

Greece May Find U.S. Bond Sale No Cheaper Than Europe

Bloomberg | April 7, 2010 | 08:27 EDT

Greece may discover it’s no cheaper to sell bonds in the U.S. than in Europe as the government seeks to persuade investors it can plug the region’s biggest budget deficit. Investors may demand a yield of as much as 7.25 percent to buy Greek 10-year dollar bonds, 414 basis points more than benchmark German bunds and 331 basis points more than Treasuries, according to Paris-based Axa Investment Managers, which oversees about $669 billion. TCW Group Inc., which manages $115 billion in assets from Los Angeles, says Greece may have to offer a premium of as much as 400 basis points over Treasuries.

Petros Christodoulou, director general of Greece’s Public Debt Management Agency, said March 31 the country planned a “roadshow” in the U.S. and maybe Asia to drum up investor demand for a sale of dollar-denominated bonds. The country may offer as much as $10 billion of the securities, the Wall Street Journal reported the same day. Greece is struggling to tackle a budget deficit that is equivalent to 12.7 percent of gross domestic product, more than four times the European Union’s 3 percent limit. “U.S. investors won’t want to be paid less than what European investors are demanding,” said Stuart Thomson, who helps oversee more than $100 billion as chief market economist at Ignis Asset Management in Glasgow, Scotland. “The market wants them to say we would do what’s necessary to get funding costs down and if that means a more aggressive reduction in expenditure, then so be it.”    

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EU commissioners and Germany at odds over urgency of helping Greece

Deautsche Welle | European Union | 21.03.2010

The heads of the 27 European Union member states meet later this week to discuss long-term economic policy. But the EU’s field of vision remains occupied by how to resolve Greece’s financial predicament. Although European Union commissioners are pushing for quick action on some sort of rescue provisions for heavily indebted Greece, Germany is still disavowing the need for any such proposal – especially one that would dominate the agenda of the March 25-26 summit of EU heads of state. "There’s no looming insolvency," Merkel told German broadcaster Deutschlandfunk on Sunday. "I don’t believe that Greece has any acute financial needs from the European community and that’s what the Greek prime minister keeps telling me." But European Commission President Jose Manuel Barroso said on Friday that an EU standby aid package for Greece should be assembled "as soon as possible."

Asking for a hand, or a handout?

Greece may not be asking for immediate loans from its fellow euro-zone members, but it is hoping they can offer some security that would allow them to borrow money at less than the interest rates it is currently being offered. One way to do that is the establishment of a sort of contingency plan – offers of loans that can be redeemed if Greece finds itself unable to make payments on those loans, despite draconian budget cuts the country approved recently. EU Commissioner for financial affairs Olli Rehn told the Welt am Sonntag newspaper that the commission "was ready to make a concrete proposal" for Greece, one that would be connected to "strict" obligations.      

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Greece faces Europe sanctions without spending cuts

BBC NEWS | 2010/02/16 | 08:21:28 GMT

Greece has been told that it must make further spending cuts or face sanctions, the Eurozone chief has said. Jean-Claude Juncker told German radio that Greece must understand that other Eurozone members are not prepared to pay for its mistakes. After the European Union vowed to help Greece last week, the tone has turned harsher this week as talk of a bail-out proves unpopular. Greece’s woes have sent the euro down to a nine-month low recently. Mr. Juncker – chairman of the 16 nations that share the single currency and also Luxembourg’s prime minister – has said Greece agreed to outline additional cuts in March if necessary. He added that further measures would be imposed if Greece’s debt reduction plans were not shown to be on target by 16 March.

‘Completely wrong’

Greece’s debt crisis is “first and foremost a Greek problem and an internal Greek problem,” Mr. Juncker said. “The financial markets are completely wrong if they think they can destroy Greece,” he added. Europe’s leaders pledged to help Greece last week – without spelling out exactly what they were willing to do. “We won’t abandon Greece,” French Finance Minister Christine Lagarde told reporters. “It’s clear that we    Continue reading