EU says no bailout, no default

A top European Union official said yesterday there was no chance of a default by Greece or an EU bailout as the premium demanded by investors to hold Greek bonds over German Bunds rose further. Speaking to news agencies, Monetary Affairs Commissioner Joaquin Almunia said there is no question of a bailout with regard to Greece, adding that default was not possible in the euro area. «Greece will not default. Please. In the euro area, the default does not exist because with a single currency the possibility to get funding in your own currency is much bigger,» he told Bloomberg TV. Almunia’s comments went some way to soothing jittery debt markets. The cost of securing Greek debt against default fell to 397,000 euros per 10 million of exposure from a record high of 422,500 on Thursday, according to CMA DataVision. The premium demanded by investors to hold Greek government bonds over benchmark German Bunds also fell on reports that Greece might get aid, but again widened after Almunia ruled out an EU bailout. The Greek 10-year government bond yield spread over Bunds widened to 380 basis points, having earlier narrowed to 365 bps versus 397 bps late on Thursday. It had soared to a euro lifetime high of 405 bps earlier this this week. Meanwhile, the German government said yesterday that the market’s reaction to Greece’s financial situation is overblown, and that there’s no need to discuss steps by European Union states to help the Greek government cut the budget deficit. «The successful Greek bond sale on January 25 confirms that the Greek government continues to have access to international capital markets,» German Finance Ministry spokesman Michael Offer told reporters in Berlin. «The signals are being read more or less calmly from our side.» German Foreign Minister Guido Westerwelle will travel to Greece on February 2, when he will discuss the Greek government’s efforts to reduce the deficit, the EU’s biggest. Germany considers the Greek plan «appropriate,» Offer said.

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