E.U. Praise for Greece Fails to Stem Bond Sell-Off
On Thursday, as more investors fled Greek bonds, they drove the government’s long-term borrowing costs to nearly 9 percent — up from 7 percent on Wednesday and the highest level since January.
Although Greece appeared to be on the road to recovery a few months ago, it has recently helped stir up a storm in European bond markets as investors realized that Athens might not be on such a firm path after all.
“There is clearly the potential for contagion similar to what we saw in 2012,” said Mujtaba Rahman, the director for Europe for the Eurasia Group, a political risk consulting firm. “People have been asking what’s the trigger that will cause things to unwind, and it now seems it’s a combination of concern about Greece, the broader economic environment in the euro area, and a conflict between Germany” and the rest of Europe over budget discipline and the potential remedies for what ails the eurozone.
In Brussels, Jyrki Katainen, the European Union’s commissioner for economic and monetary affairs, sought to assure investors that Greece’s recovery continued to be on track.
The latest troubles come as Prime Minister Antonis Samaras seeks to lead Greece out of its 240 billion euro, or $305 billion, bailout program and shed the oversight of the country’s so-called troika of lenders — the European Commission, the European Central Bank and the International Monetary Fund — by the end of this year.
While the part of the bailout funded by the European Commission and the E.C.B. is closing this year, the I.M.F.’s portion is scheduled to run for at least another year. The I.M.F. warned recently that Greece may run out of funding without it.
“Whether Greece is running a primary surplus or not, whether Greek banks will fare well, whether the quarterly growth numbers turn positive — these are academic factors that do not resonate with the broader public,” Mr. Rahman said. “While the government has done a lot to put Greece on the road to stability, that hasn’t translated into a positive sentiment for the average voter.”
Source: NYT- E.U. Praise for Greece Fails to Stem Bond Sell-Off
