Bond spread ‘is excessive’

The soaring cost of borrowing in Greece, as reflected by widening bond spreads, is excessive, according to the director of the Bruegel Institute, Jean Pisani-Ferry. In an exclusive interview with Kathimerini, the economist and economic adviser to France and the European Commission says that «the widening of the spread mainly reflects the situation in the market, namely the desire to avoid the risk of a lack of cash flow.» «In a crisis it is often very hard to discern the various aspects, the difference between cash flow and solvency. Yet this is a warning signal that nobody can afford to ignore,» says Pisani-Ferry. He argues that the eurozone is not properly prepared for crisis management, as the administrative system of the economic and monetary union has so far been confined to averting high fiscal deficits, and without much success. He does make clear, however, that issuing eurobonds is not the answer, arguing that if a country needs help meeting its borrowing requirements, the International Monetary Fund would be better placed to guarantee the fulfillment of obligations than the European Union. However, he acknowledges that such a development would certainly be «a political shock for Europe.»