In Brief
Germany risks credit rating if it helps Greece Germany risks either harming its credit rating or damaging exports depending on whether it agrees to help bail out Greece, according to Schroders Plc. Any transfer of funds to the European Union’s most indebted nation from its biggest economy may hurt Germany’s AAA rating, said Jamie Stuttard, who oversees $25 billion as head of European fixed income at the London-based company. A refusal to do so would harm the economies of countries such as Greece, Ireland, Italy, Portugal and Spain and damage Germany’s ability to sell goods into those markets, he said. «We have this fairly binary decision,» Stuttard said. «If it leaves Greece to sink or swim then Germany will preserve its own creditworthiness, but the export market for German goods across Southern Europe is going to be negatively impacted.» European finance ministers signaled on February 16 they may provide Greece with support if it takes what EU Monetary Affairs Commissioner Olli Rehn called «determined action» to reduce its budget deficit. (Bloomberg) Each EU country may decide on support European Central Bank Executive Board member Lorenzo Bini Smaghi said individual European Union countries may have to financially support Greece as it struggles to reduce the bloc’s biggest budget deficit. «Europe will help Greece save itself,» Bini Smaghi said late on Monday in an interview on «Otto e Mezzo,» a program on Italy’s La Sette television channel. «This may also mean that money is needed.» Germany wants euro-area governments to provide Greece with loans and guarantees of 20 billion euros ($27 billion) to 25 billion euros, conditional on steps by the government to cut the deficit, Der Spiegel magazine reported February 20. Germany would finance almost 20 percent of the aid, the magazine said, without saying how it got the information. «The amount will be more limited than what has been reported,» said Bini Smaghi, referring to the Spiegel report. Officials in Athens have pledged to reduce the budget gap from 12.7 percent of output in 2009 to 8.7 percent by the end of this year. Prime Minister George Papandreou told this week’s edition of Der Spiegel that he needs EU support to finance the country’s debt at «normal conditions.» Greece needs to raise 53 billion euros this year, the equivalent of about 20 percent of its gross domestic product, and faces bond redemptions of about 8 billion euros on both April 20 and May 19. «European authorities are backing strongly the country and will provide support if needed,» Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc in London, said. «This is a solidarity story, not a breakup story; however, a loss of fiscal sovereignty for the Greek government seems inevitable.» (Bloomberg) Spanish debt The secretary-general of the OECD says Spain’s debt load is not big enough to put the government’s solvency in question. Angel Gurria says Spain is not comparable to Greece, which is in the midst of a debt crisis. Gurria told a business forum yesterday that Spain’s overall public debt – 55 percent of GDP last year and projected to peak at 74 percent in 2012 – is «still manageable.» (AP)
