23 April 2010

Greece: the end is close (chapter two)

Yesterday’s Eurostat release of provisional 2009 budget deficits across Europe outlined that Greece will not survive this crisis without a very rapid lifeline: the Greek deficit it now stands at 13.9% of GDP vs the latest revised number of 12.9%! But this is not the end of it: Eurostat has reservation on the quality of Greek data and both the deficit and the debt/GDP ratio could be revised upwards. The situation is worsening as the analysis of Q1 2010 execution program shows and numbers are changing all the time.
Greece needs to refinance EUR 8.5 billion 10 year bond by May 19th (15th in fact due to the week-end and 3 days settlement) + whatever is needed to plug the deficit (I guess they would ideally issue EUR 10 billion minimum). The interest on this was 6% and my view is that the market will not finance it even at punishing rates. The spreads are just zooming up and are becoming consistent with a default at nearly 10% above Germany’s 2- yr debt:
The credibility of the EU is damaged each time we go round the same boring course. The great favor Head of European States can do to Europeans is to organize an orderly default of Greece; the time for a rescue has passed.
Once again, instead of pointing the finger at speculators supposedly responsible for the current crisis (imbalances attract speculators not the other way around), European politicians should have faced the reality, analysed it correctly and acted accordingly instead of failing lamentably.