Path to new bailout starts to open
Talk grows of softer stance from Germany; Fitch suggests Athens will probably get extra help
Talk grew yesterday that Germany may consider abandoning a push to reschedule Greek debt early and that Greece is edging closer to receiving a new package of financial aid, helping it avoid default.
A report from The Wall Street Journal said that Berlin was considering concessions in efforts to support the country by dropping its push for an early rescheduling of Greek bonds.
The report was followed by comments from Fitch rating agency saying that Greece will probably get the bailout loans needed to avoid becom- ing the first euro country to default.
While filling a financing hole of about 30 billion euros next year, the European Union is also unlikely to force Greece to extend maturities, a step opposed by the European Central Bank, according to a note released by Fitch yesterday.
Greece will probably remain shut out of financial markets beyond the scheduled end of the 110-billion-euro bailout in May 2013, Fitch said in a report on its May 20 decision to cut Greece’s credit rating three levels to B+.
“Incorporated into the B+ rating is Fitch’s expectation that substantial new money will be forthcoming for Greece from the EU and the IMF and that Greek sovereign bonds will not be subject to a ‘soft restructuring’ or ‘reprofiling’ that would trigger a ‘credit event’ and consequently a default rating from the agency,” Fitch said.
The yield on the 10-year German bund climbed seven basis points yesterday, while Greek yields slid 30 basis points. Greek 10-year bonds yielded 1,308 basis points more than their German equivalents, down 1,345 bps on Monday.
Credit default swaps on Greek government debt dropped 54 basis points to 1,396 bps.
As fears ease of a debt restructuring, the euro rose to a three-week high against the dollar on Tuesday, hitting $1.4423.
Meanwhile, Jean-Claude Juncker, head of the group of euro-area finance minister, said late on Monday that European Union leaders will decide on additional assistance for Greece by the end of June and have
from ruled out a “total restructuring” of the nation’s debt.
The assessment by a team of officials from the European Union, the International Monetary Fund and the European Central Bank “will partly determine our position” on Greece, he said.
“We are waiting for their final judgment, their position that will partly determine our position,” Juncker said. “So it’s too early before receiving their report early next week to bring a definitive answer. I am rather optimistic.”