Greece may default next week
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Experts have warned that Greece may default by next week should Eurozone members not come to an agreement on a rescue package.
Yesterday Standard & Poor’s downgraded Greek government debt two notches to junk status. This has led to drops in world markets and a reduction in the Euro.
European Central Bank president Jean-Claude Trichet says the possibility of a Greek default is “out of the question” but experts warn that the ECB must make sure all its members give the €30bn rescue loan the go-ahead before next week.
Barclays Capital analyst Julian Callo says all eyes are on Germany, where ECB President Trichet and International Monetary Fund managing director Dominique Strauss-Kahn are due to address the Bundestag today. The German government has called for Greece to bring forward detailed plans as to how it will reduce its budget deficit by 4 per cent of GDP by 2011 before it will vote for the €30bn ECB loan to be activated.
Callo says: “So far Germany has signalled a vote is likely only on May 3. France has also signalled a parliamentary vote for next week also. Even next week sounds like it could be too far away in the current crisis.”
Charles Stanley analyst Jeremy Batstone-Carr says: “Bad though that is, what might happen if the country runs out of cash altogether? The entire nation will take a gigantic ‘haircut’ on incomes, social security payouts and more. Commercial entities, particularly those engaged with the public sector, will not be paid. The economy will simply seize up. Frighteningly, we do not know whether Greece has got until May 10 to survive.”
Reports suggest the IMF may up its loan to €25bn from €10bn, meaning Greece would receive a combined IMF ECB €55bn rescue package.
BNP Paribas analyst Olivia Frieser says: “The contagion is definitely spreading and spreading quite rapidly to Portugal, Spain, Ireland and Italy. The nervousness has even spread to France, which is trading wider than Japan and China. It is highly irresponsible and despicable on the part of the EU and IMF to let the situation get to this point without providing a concrete solution. The central banks and politicians will have themselves to blame for the present mess they are creating.”
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Readers' comments (1)
Anonymous | 17 May 2010 2:51 am
Greece and Spain won't pay back. This was a calculated Risk, and a Lesson for the Banking System. What is happening in Greece, is a very well orchestrated show, to get granted €110bn aid, to avert meltdown. A new deception compared with the old Trojan Horse. The only thing Germans can do is:
REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
http://www.defenseindustrydaily.com/Greece-in-Default-on-U-214-Submarine-Order-05801/
But don't worry; the ECB, the Feds or both will print the money.
And all of us will share the pain, with our hard-earned money.
Bad is never good until worse happens.
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