As bonds slump, Juncker warns of solidarity limits
Eurogroup chief Jean-Claude Juncker said yesterday he remained opposed to a total restructuring of Greek sovereign debt but Athens had to prove it was serious about implementing budget reforms.
“Greece must know solidarity has its limits, if people get the impression that the Greek side is lacking the necessary solidity,” Juncker told the Stuttgarter Zeitung daily.
“Greece now has the burden of proof in terms of solidity.”
Meanwhile, Greek 10-year bonds slumped yesterday on concern that a potential reprofiling of the nation’s bond maturities would deter the European Central Bank from accepting the debt as collateral.
The spread, or yield difference, between benchmark Greek debt and German bunds widened for a fourth day.
ECB President Jean-Claude Trichet told finance ministers this week that should Greece be given more time to repay debt, the central bank would revoke a special arrangement under which Greek debt is accepted as collateral.
“This further underlines the clear divisions within euro- area officialdom as regards how to deal with Greece’s debt funk,” Richard McGuire, a senior fixed-income strategist at Rabobank International, told Bloomberg.
“A refusal to accept Greek debt as collateral would result in an unsustainable bout of illiquidity in the Greek banking sector. The mixed messages underpin the risk of further peripheral tension as the market frets over this apparent policy disarray.”
Yields on 10-year Greek debt rose 23 basis points to 16.03 percent. Two-year Greek note yields fell 17 basis points to 24.82 percent.