ECONOMY

Fiscal show goes on the road

Finance Minister Giorgos Papaconstantinou will meet with his German counterpart in Berlin today as part of the Greek government efforts to convince EU peers and investors it is taking the steps needed to get the country back on the right fiscal track. Papaconstantinou will meet Federal Minister of Finance Wolfgang Schaeuble for talks on the state of the Greek economy and its public finances. The two ministers are unlikely to address the press or issue any formal joint statements, according to local press reports. German goverment sources played down the importance of the meeting, describing it as an initial discussion between two ministers who recently assumed their portfolios. Papaconstantinou is scheduled to travel to Paris this evening to meet with his French counterpart Christine Lagarde before traveling to London tomorrow where he will hold talks on the country’s fiscal health with institutional investors. Meanwhile, fixed income markets showed investors are waiting for more concrete steps from Greece in its fight against high deficit and debt levels. Before Prime Minister George Papandreou’s announcements late yesterday, the cost of protecting Greek government debt against default rose. Five-year credit default swaps (CDS) on Greek government debt rose to 223.5 basis points, up from 199.7 bps at the New York close on Friday, according to monitor CMA DataVision. Greek CDS had risen to 231 bps last week. Concerns about Greece’s fiscal position were heightened after Fitch Ratings cut the country’s sovereign debt rating to BBB+ last week. The premium demanded by investors to hold 10-year Greek government bonds rather than eurozone benchmark German Bunds also rose yesterday. The 10-year Greek bond yielded 219 basis points (bps) over equivalent-maturity Bunds, compared with 209 bps late the previous trading day. The spread had narrowed significantly late last week after European officials expressed support for the Mediterranean nation. Greece must take steps to ensure it improves its rating by the end of next year, according to European Central Bank Executive Board member Lorenzo Bini Smaghi. «From our point of view, Greece needs to put in place as soon as possible measures that allow its government bonds to recover an A rating by the end of 2010,» he told Italian daily La Stampa. Sarkozy confident French President Nicolas Sarkozy said yesterday he was confident that Greece would be able to straighten out its fiscal situation. He said he had been reassured after hearing Prime Minister George Papandreou speak at a European leaders meeting in Brussels last week. «We were all convinced by his explanation and we are confident they will confront a situation that needs addressing quickly,» Sarkozy said at a news conference. Meanwhile, Europe’s Economic and Monetary Affairs Commissioner Joaquin Almunia told a Spanish newspaper that Greece cannot rely on the eurozone to sort out its fiscal problems. «If Greece does not take the necessary measures to overcome its problems, the eurozone won’t be able to take them in the name of Greece,» Almunia told the El Pais daily. «Greece’s problems have to be resolved by the Greek government, by Greek political parties and by Greek society,» said Almunia. Almunia said other European countries faced similar fiscal challenges but singled out Ireland’s recent tough budget cuts for praise. (Reuters, Kathimerini)