Restructuring debate rages

As the debate rages over whether Greece should go ahead with a debt restructuring, Greek bonds slumped on Wednesday and the costs of insuring against default soared once again.

The nation?s 10-year yields rose to a record for the ninth consecutive day, breaching 16 percent. Greek two-year yields surged as much as 102 basis points to 25.26 percent, and were at 25.03 percent.

The cost of insuring debt sold by Greece rose to a new record high. Contracts on Greece jumped 21 basis points to 1,376 basis points, according to Credit Market Analysis (CMA).

On Wednesday, it was the turn of the head of the world’s biggest bond fund to argue that Greece is far from stabilizing its finances and should restructure its sovereign debt.

“So far none of the solutions for the Greek debt crisis have worked. And a lot of people — including me — don’t believe that they will work in the future,» Mohamed El-Erian, chief executive of Pacific Investment Management Company (PIMCO), wrote in an article for German daily Handelsblatt.

Greece will need «a preferably voluntary and orderly restructuring» to relieve itself of its debt burden, the PIMCO CEO said.

He said that Greece’s rescue by the European Union, the European Central Bank and the International Monetary Fund had not brought the results that were hoped for and called for urgent improvements.

El-Erian admitted though that efforts so far have reduced the risk of contamination for other countries and institutions.

Meanwhile, the ECB continued to reject talk of a debt restructuring on Wednesday through ECB Governing Council member Athanasios Orphanides, who told reporters in Nicosia that Greece has made significant progress in implementing an EU-IMF austerity program and any suggestion of restructuring its debt would be wrong.

“A restructure would be wrong. It would be undesirable for the Greek economy, for the economy of the eurozone, unnecessary, and it is just a very bad idea,» he added.

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