Strikes sustaining investor jitters

As the government puts the final touches to proposed tax reforms aimed at helping solve the country’s massive fiscal problems, Greek equities came under renewed pressure yesterday. Greek bond yields spiked and stocks on the Athens bourse tumbled 3.86 percent on a bank-led drop due to concerns that upcoming worker strike action may prevent the government from pushing through much-needed reforms. Experts said investors are not giving countries like Greece, Spain and Portugal the benefit of the doubt regarding plans to slash budget deficit figures, instead waiting to see some concrete results in this direction. The yields of Greek government bonds compared to benchmark German issues widened after a warning from the civil servants’ union group ADEDY that more strikes were forthcoming. The spread between 10-year Greek government bonds and benchmark German Bunds spiked to as much as 365 basis points, up from Friday’s 350 bps, before narrowing later in the day. The rising cost of Greek government debt and the country’s deteriorating macroeconomic health are taking a heavy toll on the bank sector, whose shares plummeted almost 7 percent. Higher interest payments for the Greek government are pushing up lenders’ funding costs while the economic downturn will make it harder for customers to pay back loans this year. National Bank, the country’s largest lender, took steep losses, dropping 8.51 percent to 12.90 euros. In the last week, the bank has lost more than 17 percent of its market capitalization, which now totals 7.8 billion euros. EFG Eurobank stock also tumbled, sliding 9.01 percent to 5.05 euros. In the coming days, Finance Minister Giorgos Papaconstantinou is expected to unveil tax reforms aimed at helping Greece collect an additional 5 billion euros in 2010 that will go toward reducing its budget deficit. [email protected]

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