ECONOMY

Default fears ‘exaggerated,’ says S&P

As European Union officials met in Brussels yesterday to discuss the possibility of helping Greece tackle its debt crisis, ratings agency Standard and Poor’s (S&P) said the risk that Greece will be unable to repay its bond investors may be exaggerated. «Capital markets have been overshooting relative to Greece’s fundamentals,» Moritz Kraemer, Frankfurt-based managing director of European sovereign ratings at S&P, said in a telephone interview to Bloomberg. «Greece’s default is very unlikely.» The Greek government recently unveiled a package of austerity measures worth 4.8 billion euros that will help the government tame its budget deficit by slashing spending in the public service and upping taxes. The measures, however, are seen taking the wind out of the sails of the 250-billion-euro Greek economy which is largely driven by private consumption. The austerity measures may lead the Greek economy to shrink by as much as 4 percent this year, according to a research note prepared by Deutsche Bank. «The adjustment remains a Herculean task, and the costs of the adjustment in terms of lost output could be larger than policymakers currently anticipate,» the note said. On the job front, the German bank says unemployment in Greece could rise to 20 percent, twice what the Greek government expects. Greece’s jobless numbers hit 10.6 percent in November, reaching a five-year high.