PM insists Greece can go it alone on fiscal plan

Prime Minister George Papandreou repeated yesterday that Greece doesn’t need to borrow from European partners to finance its budget deficit but investors remain unconvinced that the government has the right plan to solve its fiscal problems. The extra yield that investors demand to hold Greek 10-year securities instead of similar maturity German bonds widened to 405 basis points yesterday, the most in more than a decade. Papandreou told the World Economic Forum in the Swiss ski resort of Davos that Greece would not leave the euro area and would use the discipline of membership to slash its budget deficit and make long-postponed structural economic reforms. «The answer is very simple. We went [to the market] for borrowing two days ago and we were five times oversubscribed. We’re not looking for money from anywhere else, from the European Union,» said Papandreou. Fears over Greece’s poor fiscal health are putting downward pressure on the euro, which fell to below $1.40 yesterday for the first time since last July, while the premium investors demanded to hold Greek debt rose to 4.05 percentage points over German Bunds. Greece is now borrowing at rates it used to pay as a non-eurozone member. «This is an attack on the eurozone by certain other interests, political or financial, and often countries are being used as the weak link, if you like, of the eurozone,» Papandreou said. Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country holds the European Union’s rotating presidency, rallied to Greece’s defense and told the same panel that those putting pressure on the euro now had opposed its creation at the outset in the 1990s. France’s Le Monde daily reported yesterday that countries including France and Germany were studying how to quell market nerves, but would only act if Athens did more to clean up its accounts. Both the German and French governments denied the story. John Lipsky, first deputy managing director of the International Monetary Fund, described Greece’s stabilization targets as being «ambitious and appropriate.»

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