Greek debt soars as crisis continues
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Greek debt hit decade-highs yesterday fears escalated over the solvency of the indebted nation.
Yields on Greece’s ten-year bonds moved above 8 per cent, the highest point in more than ten years and the highest rate the debt has been at since Greece entered the single monetary union.
Greek 10-year yields reached highs of 8.415 per cent yesterday, more than 500bps above German Bunds.
Reports say the International Monetary Fund and the European Central Bank are meeting in Athens this week to thrash a plan to see how much of the €45bn lifeline pledged by both bodies it will need to meet its debt obligations while enacting severe austerity measures.
The IMF says it is concerned that the Greek situation must be finalised as soon as possible. In its World Economic Outlook it said: “If unchecked, market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown and contagious debt crisis.”
In its latest fiscal update this week, Greec revealed it had reduced its budget deficit by 40 per cent on the previous quarter, down €4.1bn. It says it is still on track to reduce its deficit to 8.7 per cent of GDP by the end of the year.
CreditSights analyst David Watts says Greece is likely to need the entire €45bn EU IMF aid package in 2010 and will probably need even more assistance in the near future.
He says: “If the [Greek] government finds it harder to reduce its spending and raise taxes than the IMF and the EU are assuming, then Greece may need to borrow more than €135bn over the next few years.”
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