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 'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
- 2 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 If you think Russell Brand’s new book is confused, you should read what his critics have to say about it
- 5 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
Halloween 2014: From the Screaming Man of Pluckley to the 'White Lady' of the Tower of London - Britain's 20 most haunted places
Russian politician says Apple CEO Tim Cook 'should be banned' from country after coming out as gay
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...