Greek unrest threatens Euro economies
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The instability of Greek finances and finances of other weakened EU nations may threaten the economies of other EU countries.
According to reports, German economics minister Rainer Bruederle told delegates at the Davos Economic Forum yesterday that Greece’s spiralling debt problems and those of other struggling Eurozone economies may have “fatal effects” on the Euro and Europe’s economies.
Ten-year Greek bond yields rose to 7.25 per cent yesterday, but have since fallen to 7.14 per cent this morning. These yields are now as high as bond yields of some emerging countries in Europe. Other bond yields in the Euro area have also risen and the Euro has dropped to a six-month low against the dollar.
BNP Paribas analyst Olivia Frieser says: “As Greek sovereign CDS spreads continue to widen and underperforms today, we ask ourselves the question more pressingly about who is most exposed. We hate to break the news, but it is impossible to say.
“As long as Greek sovereign and bank spreads remain under pressure, this will weigh on the wider European banking sector.”
According to Chancellor Alistair Darling, the UK will not be part of any rescue mission to help Greece’s finances. According to the FT, speaking in Davos Darling said: “The euro area has primary responsibility for anything that might be happening. We are not involved in that.”
Also speaking in Davos yesterday, reports say Greek Prime Minister George Papandreou said his country was being treated as the “weakest link” by investors looking to take advantage of Europe’s financial weaknesses.
Moody’s has also warned that the finances of Portugal are precarious: “Portugal’s new budget proposals reveal the scale of the challenges ahead for the country’s economy. A credible plan for deficit reduction will be needed to ensure the government’s ability to reverse its adverse debt dynamics,” it says.
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