Ratings agency Moody’s expressed concerns yesterday about whether Greece’s economy will be able to grow over the next decade as the government wrestles with one of the highest debt levels in the eurozone.
“We have some concerns about [Greece’s] ability to generate a rate of growth over the next 10 years and a level of fiscal adjustment that will keep the debt at the current level,” Moody’s Sovereign credit officer Pierre Cailleteau told Reuters in Brussels.
“We think the odds are there are going to be further [budget] slippages over the next five years or so. We’re reviewing and it’s going to be pretty rapid.”
Moody’s has downgraded only Ireland among the eurozone’s countries, but some analysts speculate Greece could be next in line. The agency has Greece on review for a possible downgrade.
In response to Cailleteau’s comments, the cost of protecting government debt against default in Greece rose to 152 basis points yesterday, according to monitor CMA DataVision.
Five-year credit default swaps (CDS) on Greek government debt climbed from 144.5 bps at the New York close on Thursday.
It means the cost rises to 152,000 euros to protect 10 million euros’ worth of Greek government bonds.
Greece was not alone in seeing a widening CDS yesterday. Ireland, whose CDS came close to topping 400 bps in March, rose to 147.8 bps from 144.4 bps on Thursday.
While unveiling a draft plan of the budget earlier this week, the Greek government said it is aiming to lower its budget deficit next year to 9.4 percent of gross domestic product from 12.7 percent this year.
The country’s public debt, as a percentage of GDP, is seen increasing to the highest in the eurozone next year, rising to 120.8 percent of annual economic output.
Economists described Greece’s forecast for a negative growth rate of 0.3 percent next year as realistic but added more may be needed to cut the deficit by 3.3 percentage points, a difference representing nearly 8 billion euros.
(KATHIMERINI, 11/08/2009)