Path to new bailout starts to open

Talk grows of softer stance from Ger­many; Fitch sug­gests Athens will prob­a­bly get ex­tra help

Kathimerini English - - Business & Finance -

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.”

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