World Business
EU agrees on Greek rescue terms, Fitch downgrades
(Agencies)
Updated: 2010-04-10 06:05
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GOLDMAN SEES AID PROGRAM
The Greek economy is officially forecast to contract by 2.0 percent this year after a similar fall in 2009, but some economists now expect the decline to be even sharper.
That would make it harder to reach a promised budget deficit cut of four percentage points of gross domestic product this year and to sustain the fiscal adjustment over several years.
Greece's Finance Minister George Papaconstantinou briefs reporters after a meeting with Prime Minister George Papandreou in Athens April 9, 2010. Greece will not seek the activation of an EU-IMF aid mechanism decided by European leaders last month, Papaconstantinou said on Friday. [Agencies] |
Finance Minister George Papaconstantinou earlier said bond spreads of more than 400 basis points over German bonds did not reflect the real state of the economy or the government's austerity measures.
Asked by reporters after meeting Prime Minister George Papandreou whether Greece wanted the aid plan activated, he said: "No. This issue has not been raised ... we have said that Greece does not intend to use this mechanism."
However, financial markets are increasingly betting on an early resort to the rescue fund.
Geoffrey Yu, a currency strategist at UBS, said it could be "days, rather than weeks" before the IMF comes to Greece's aid.
Greece needs to borrow about 11 billion euros by the end of May to finance maturing debt and interest payments. Its overall borrowing requirement for this year is 53 billion euros.
The next test will come on Tuesday, when it will auction 1.2 billion euros in six- and 12-month T-bills, a government official said.
The euro zone source said that the bloc's finance ministers would issue a statement clarifying the terms of the aid for Greece at their meeting in Madrid on Friday, but could do that earlier should Greek yields surge on the market before then.
Goldman Sachs' Chief European economist Erik Nielsen said in a note issued Thursday he expected an 18-month aid program by the end of April worth 20-25 billion euros, co-financed by the euro zone and the IMF.
