Greece and debt are two terms that are fatally joined of late. It is no surprise that Fitch has downgraded Greece’s credit rating to the ignominious BBB- level, which is about as low as it can go. The European Union might make debt relief possible for Greece, but only if they’re prepared to contribute many billions of Euros within the name of Greece’s debt. Sky News Online reports that when Greece could have to borrow in order to cover its 8.5 billion-euro debt – which comes to maturity on Might 19 – Greece’s national debt now bares the albatross of junk status. Since the Greece debt has hit junk status, the Grecian government is on the hook to pay more than a 10 percent rate of return on all outstanding 10-year sovereign bonds. For the record, says Sky News, that’s the highest bond rate of return ever seen in the eurozone.
How junk rating makes Greece debt bad for investors
Sky News indicates that junk status for the Greece debt places “big investors such as pension funds” in a position where they “will no longer be allowed to buy the country’s debt.” This conundrum would place Greece and their debt in the same arena of financial calamity as nations like Colombia, Romania and Azerbaijan. Greek citizens are desperate for solutions to separate Greece from debt; their protests outside the offices of the finance ministry are but one sign. If Greece and massive debt are not soon parted, said KBC Securities economist Koen De Leus to Sky News, the entire European market will suffer. The euro is already down to a new one-year low against the dollar, when stock markets across the European Union have dropped substantially. The ripples even dropped the Dow Jones by 200 points yesterday.
Greece will pay debt ‘absolutely and without any doubt,’ says Papaconstantinou
Investor confidence is vital for Greece and their debt at this time, but few are confident that Finance Minister George Papaconstantinou’s bold prediction will come to pass. Greece must handle debt with speed and efficiency, a notion that British Chancellor of the Exchequer Alistair Darling told a joint meeting of the European Central Bank, International Monetary Fund and other banking unions. Greece has a debt mountain before them that will require more than just pay day loans from the European Union, but significant aid.
Sources
Sky News Online
http://news.sky.com/skynews/Home/World-News/Greeces-Sovereign-Debt-Downgraded-To-Junk-Status-Sending-Stock-Markets-Tumbling/Article/201004415621202?f=rss
