Securitization is dead

Greece will not proceed with one-off securitization plans aimed at plugging its budget gap after objections from the European Commission, the Financial Times quoted its finance minister as saying yesterday. «Securitization is dead. New rules will be produced by Eurostat and there’s no point in our proceeding with a deal that would not be acceptable,» Giorgos Alogoskoufis told the newspaper in an interview. Last month, the government said it would drop its securitization plans from the 2005 and 2006 budgets, relying instead on spending cuts and a crackdown on tax evasion to cut its budget deficit to below the EU’s deficit cap. Athens’s latest economic targets presented Thursday saw a budget shortfall of 2.6 percent of GDP in 2006 against an estimated 4.3 percent this year. This is seen falling to 2.3 percent in 2007 and 1.7 percent in 2008. Greece must bring its finances into shape to avoid possible EU sanctions after it revealed it had underestimated its deficit for years, even in 2001 when it joined the eurozone with a budget deficit above the EU ceiling. The government had initially aimed for 1.5 billion euros in one-off securitization revenues this year and 1 billion euros in 2006. «The situation at Eurostat is still uncertain, but the Commission message is clear,» Alogoskoufis told the newspaper, adding securitizations would in the future be treated as debt and not revenue raising operations. (Reuters)