Implicit German guarantee helps Greece raise €1.5bn from investors
Wednesday 14 April 2010
The Greek rescue package passed its first test easily yesterday when the latest auction of that country's government debt was heavily oversubscribed.
The euro continued to strengthen on international markets, buoyed by the encouraging news from Athens. Investors seemed keen to take up the relatively generous yield on the paper, now accompanied by an apparent implicit guarantee from the German government.
Greece raised around €1.56bn (£1.38bn) through the sale of bonds with six-month and one-year maturities, in an offering that was 6.5 times oversubscribed.
The yield on the bonds, at 4.85 per cent, is lower than it would have been had the rescue package not been agreed, but was still high, even by recent standards.
A similar issue in January carried a return of 2.2 per cent. This suggests that, while short-term worries about Greece's situation have been dispelled, many on the markets still judge the crisis far from over. The possibility of a debt restructuring – in effect default – hangs over the Greek government's efforts to raise money and stabilise the economy.
The seriousness of European efforts to bring the Greek crisis – which has devalued the euro and stymied eurozone confidence and growth – to an end were underlined yesterday in remarks by the French Finance Minister, Christine Lagarde. She said the aid package from fellow eurozone members – comprising a series of bilateral deals – leaves "no room" for disagreements that would substantially alter the loan plan if it is activated.
"It leaves no room for queries, questions or moodiness. I'm very confident that all the technical and practical aspects of the so-called Greek package have been thoroughly discussed and agreed," said Mrs Lagarde.
"It's a two-way street. It means those who have competitiveness gaps must as a matter of priority try to narrow those gaps. Those who have had massive improvements in competitiveness should also do a little something."
Mrs Lagarde and her fellow finance ministers talked the deal though in a phone conference on Sunday. The formal summit of European finance ministers starts in Brussels this Friday, at which the deal will again be endorsed.
About €30bn will be made available by eurozone nations, principally Germany and France, in three-year loans with a below-market interest rate of 5 per cent.
The IMF is also said to be "ready"to intervene with another €15bn.
Altogether, the loans account for about a fifth of Greek GDP. It is hoped that the efforts will bring to an end the most serious crisis to hit the euro since its creation in 1999, and one of the most financially traumatic in the history of the European Union.
Investors are still showing some concern about "contagion" possibly spreading to Portugal and Spain.
- 1 Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
- 2 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 4 Dad attempts revenge on teenage daughter, plan backfires spectacularly
- 5 Ball pool for adults opens in London
Isis 'throw man off a building for homosexual affair' and beat him to death when he survives
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Boris Johnson claims porn-obsessed Islamic jihadists are 'literally w*****s'
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
King Abdullah dead: We can't afford not to hold Saudi Arabia's royals to account
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...