ECONOMY

In Brief

Harvard professor says Greek measures doomed to fail Harvard University professor Martin Feldstein, who warned almost two decades ago that the euro would prove an «economic liability,» said Greece’s austerity plan will fail and the country may have to quit the single currency to fix its fiscal crisis. Under pressure from investors and fellow policymakers, Prime Minister George Papandreou’s government is striving to knock four percentage points off its budget gap this year from 12.7 percent of gross domestic product and has vowed to meet the EU’s 3 percent limit in 2012 for the first time since 2006. «The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,» Feldstein, an adviser to US presidents since Ronald Reagan, said in a March 13 interview in Geneva. «The alternatives are to default in some way or to leave, or both.» His diagnosis clashes with that of European Central Bank President Jean-Claude Trichet, who calls Greece’s strategy «convincing» and rejects as «absurd» any speculation it might leave the eurozone. Investors nevertheless aren’t ruling out Feldstein’s analysis. Billionaire George Soros said last month that the euro «may not survive,» and credit default swaps indicate a 22 percent chance Greece will default within five years, up from 16 percent a year ago. (Bloomberg) Bulgaria backtracks on health insurance payment scheme Public pressure prompted Bulgaria’s cash-strapped government yesterday to drop plans to raise health insurance payments and find other ways to support its underfunded hospitals. Prime Minister Boyko Borisov’s cabinet voted last week to increase monthly health payments for all citizens by 2.0 percentage points to 10 percent of their income in order to pump more money into healthcare. But unions and businesses slammed the move, saying it would not improve the quality of healthcare and would instead put an extra strain on the private sector and boost unemployment. Finance Minister Simeon Djankov said the government would instead make some 150,000 public sector employees, including the army and police, start paying their own social security contributions. (AFP) Portuguese bond Portugal, which is fighting off a debt crisis, said yesterday it had raised 1.25 billion euros ($1.725 billion) at an average interest rate 17.5 points below a eurozone benchmark, the Euribor rate. The Portuguese government made the issue the day after presenting parliament with an anti-crisis program to reduce overspending, largely with a wave of privatizations. The rate, or yield, quoted on Portuguese debt has eased recently, a sign of recovering credibility on financial markets, which had shown concern that a Greek-style crisis might spread to other weaker members of the eurozone. (AFP) Fixed-income bet UBI Pramerica SGR SpA, which oversees 22 billion euros ($30.3 billion) in fixed-income assets, is buying Italian government bonds after selling most of its Greek debt holdings as it seeks lower-risk returns. UBI Pramerica, which sold 750 million euros’ worth of Greek bonds between November and February, is betting the country may not be able to narrow a budget deficit that is the largest in the European Union, said Luca Franchi, the company’s head of fixed income and currencies. (Bloomberg)