Greece won’t need a rescue package to tame the European
Union’s biggest budget deficit, Finance Minister George
Papaconstantinou said as the risk premium on holding Greek government
debt rose to the highest since the launch of the euro.
“We are not expecting anyone to come to our rescue,” he said
today at a conference in Athens. He denied a report that the European Union was
preparing a loan to help Greece and said the government will be able to satisfy
its borrowing needs this year on schedule.
Investor concern that the government will struggle to rein
in its deficit drove the yield premium investors demand to hold Greek debt
instead of German bunds to the highest since the euro’s debut. Greece has
pledged about 10 billion euros ($14 billion) in budget cuts this year to bring
down the deficit from more than four times the EU limit at 12.7 percent of
economic output.
The difference in yield, or spread,
between the securities widened to more than 300 basis points as of 9:22 a.m. in
London, the most since the introduction of the euro in 1999. The 10-year Greek bond yield climbed
as much as 9 basis points to 6.25 percent, the highest since Jan. 26, 2009.
The concerns about Greece also have contributed to a slide
in the euro against the dollar. The euro declined to $1.4031 today, the lowest
in more than five months.
‘Not Valid’
The report about discussions on a possible EU loan to Greece
is “not valid,” Papaconstantinou said when asked about the story.
The EuropeanVoice reported today that EU officials are
looking into a possible “heavily conditioned” loan for Greece to ease its
fiscal crisis and stop the country from seeking aid from the International
Monetary Fund. Options include tapping the EU’s 50 billion-euro program to help
members with balance- of-payments difficulties or having governments provide
short- term guarantees, the newspaper said without citing anyone.
EU finance ministers didn’t discuss such a loan at a meeting
in Brussels earlier this week, Spanish Deputy Finance Minister Carlos Ocana
said today in Madrid. Germany said it won’t support any EU loan to help Greece
cut its deficit.
“Greece must solve its problems through its own efforts,”
German Finance Ministry spokesman Michael
Offer said today in an e-mailed statement.
Sovereign Bonds
Credit-default swaps on Greece’s five-year sovereign bonds
climbed to a record yesterday on concern the country might need a bailout. The
euro will decline further, said analysts at UniCredit SpA.
“The euro has clearly become a full Greek tragedy and a
self-fulfilling prophecy, with whatever bad news -- lower U.S. stocks, China’s
tighter monetary policy -- being an excuse to sell,” a team of analysts
including Roberto
Mialich in Milan wrote in a report today. “Stay short as reversal is
only above $1.43 and the pair will target $1.39 once $1.4080 has gone.”
(from Bloomberg)