Antonis
Samaras’s plan for Greece to exit its bailout early is crumbling in the face of
a market rejection. Economists say it might not have been such a good idea
anyway.
Greek
10-year bond yields have surged to the highest in nine months as Samaras’s plan
for a year-end exit unraveled. The prime minister’s push met resistance from
euro area and International Monetary Fund creditors, with finance ministers
from the 18-nation currency bloc publicly voicing doubts at an Oct. 13 meeting
in Luxembourg.
“What’s
important from an economic perspective is that Greece continues to commit to a
strong reform program,” said James Nixon, an economist at Oxford Economics Ltd.
in London. “The government is to a certain extent desperate to take its foot
off the reform gas pedal and ease back a bit to try to boost its popularity.”
Samaras has
said his government may pass on IMF funds available in 2015 and cover its
financing needs from markets after selling bonds for the first time since 2010
this year.
Investors Fret
Greek bonds
pared some of their losses today. The yield on 10-year debt fell 74 basis
points to 8.22 percent at 2 p.m. in Athens, still more than 20 percent higher
than at the start of the week. The premium investors charge to hold the bonds
over German bunds, Europe’s benchmark, yesterday reached its widest in more
than a year. The Bloomberg survey of 15 economists was conducted Oct. 3 to Oct.
15.
“The Greek
program is coming to a natural end and we are ensuring we have the institutions
in place that Greece will not have a refinancing risk in the years to come,”
Deputy Growth Minister Notis Mitarakis said in an interview with Bloomberg
Television’s Guy Johnson today. “The whole effort of the Greek government to
complete this stage of the program is being done in a very prudent way, and I
think that’s something markets may not have appreciated.”
While 73
percent of economists in the Bloomberg survey said Greece won’t need a third
bailout, compared with 40 percent in the last poll in July, half said the
country can’t cover its funding needs from the market without the IMF money.
Nixon said markets will “bolt” if Greece both eases back on reforms and walks
away from the IMF.
IMF Advice
IMF
Managing Director Christine Lagarde has offered a similar assessment, saying
this month that Greece would be in “a better position if it had precautionary
support.”
“We are
ready to help and we believe that it could be effective,” she said in
Washington on Oct. 9.
Greek
Finance Minister Gikas Hardouvelis told lawmakers in Athens yesterday the
country’s economic fundamentals remain strong, given its improving fiscal
position. “Anyone who follows international markets knows they often get
nervous and overreact,” he said.
Adding to
Samaras’s troubles, Alexis Tsipras of the anti-bailout opposition Syriza party
is pushing for elections in early 2015. Polls indicate Syriza, which advocates
a “significant” writedown on Greek public debt and the annulment of reforms,
would be the largest party in the parliament if an election were held now.
Early
elections “remain a fairly high risk event,” Citigroup Inc. economists
including Guillaume Menuet said in a note yesterday. A government led by Syriza
“is likely to take the degree of confrontation with Greece’s official lenders
much higher than in the past, possibly jeopardizing still-fragile foreign
investor sentiment,” they said.
(Πηγή:
bloomberg.com)
