In Brief
Greece can make it with restructuring, OECD says Greece’s «powerful» steps to overhaul the economy should enable it to escape the fiscal crisis without having to restructure its debt, said Pier Carlo Padoan, chief economist of the Organization for Economic Cooperation and Development. Speaking a day after Moody’s Investors Service downgraded Greece’s debt to junk status, Padoan lauded Prime Minister George Papandreou’s efforts to cut the deficit and make the economy more competitive. «I am convinced that Greece can make it without restructuring because they are doing all the painful things – both in the fiscal and in the structural domain – which need to be done,» Padoan said at the Lisbon Council in Brussels. Greek bonds fell yesterday, pushing the 10-year yield to 9.28 percent, the highest since European leaders on May 10 followed up a 110-billion-euro ($135 billion) aid package for Greece by offering another 750 billion euros to other fiscally distressed governments. Buyers of credit default swaps put the probability of a Greek default at 48 percent within five years, according to CMA DataVision. Papandreou delivered a «very, very powerful speech» about Greece’s economic revamp at a June 11 forum in Vienna, Padoan said. «Why should I not believe the prime minister?» Padoan said the euro’s decline from an all-time high of $1.60 in July 2008 is helping prop up the European economy, cushioning the impact of the debt crisis as it spreads from Greece to countries such as Spain and Portugal. (Bloomberg) Spain pays higher risk premium at debt auction MADRID/BERLIN (Reuters) – Spain paid an increased risk premium at a debt auction yesterday, after having had to deny German media reports that it may soon be the next eurozone state to need a Greek-style bailout. Germany’s ZEW economic sentiment indicator suffered its biggest monthly drop since the height of the financial crisis in October 2008, right after the collapse of Lehman Brothers – partly due to rumors about debt problems in Spain. A German government official said he did not think that Spain, the latest focus of concern about eurozone sovereign debt, would be on the agenda of a European Union summit about stricter fiscal rules and economic reform tomorrow. A day after admitting that some Spanish banks were being frozen out of international credit markets, Madrid raised 5.2 billion euros in 12- and 18-month T-bills at auction but paid a significantly higher average yield than last month. Marc Ostwald, bond strategist at Monument Securities in London, noted that Spain had paid far more than France, which also has a top-notch rating from agencies such as Moody’s Investor Service. «It also begs the question how Moody’s can rate Spain triple-A when you have an auction result like this… This must now put pressure on Moody’s to downgrade Spain,» he said. Turkish surplus Turkey posted its biggest budget surplus for 21 months in May as economic expansion and lower interest costs put the country on course to beat its fiscal goals for the year. The surplus in May was 5.8 billion liras ($3.7 billion), the biggest since August 2008, the Finance Ministry said on its website yesterday. The country had a deficit of 610 million liras in May 2009. Turkey’s economy returned to growth on an annual basis in the last three months of 2009 after four quarters of contraction. It may have expanded 12 percent annually in the first quarter, Finance Minister Mehmet Simsek said on June 3. The budget figures reflect better revenue collection as well as a revival in economic output, Simsek said in Ankara yesterday. (Bloomberg) Geniki support Societe Generale SA said it plans a capital increase of 340 million euros at its Geniki SA unit in Greece by the end of the year. The situation at Geniki is «worsening in 2010 due to the crisis,» Jean-Louis Mattei, head of the bank’s international banking business, said yesterday in Paris at an investors presentation. (Bloomberg)
