In Brief
Greece leads increase in cost of insuring debt Greece led an increase in the cost of insuring European sovereign debt after Fitch Ratings warned it may cut the nation’s credit rating to junk. Credit default swaps on Greece jumped 14.5 basis points to a four-week high of 984, according to data provider CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 2.5 basis points to 202.5, surpassing the November 30 record close. Greek debt may be downgraded to junk within six weeks after a review of its «fiscal sustainability,» Fitch said yesterday. Public transport workers in Athens are striking today for the fourth day this month to protest wage cuts planned in exchange for the nation’s 110-billion-euro ($144 billion) bailout. The Fitch review will focus on measures to lower the nation’s budget deficit, the economic outlook and the «political will and capacity of the Greek state» to push through austerity measures, the firm said in a statement. Greece already has non-investment grade rankings at Moody’s Investors Service and Standard & Poor’s. Swaps on Portugal climbed 6 basis points to 489, the highest level this month, after Moody’s said yesterday it may also face a downgrade. Contracts on Ireland increased 5 basis points to 594, Italy rose 4 to 225 and Spain was 7 higher at 347.5. Swaps on Belgium climbed 5 basis points to a record 212 and France was little changed at an all-time high 106 basis points, CMA prices show. (Bloomberg) Risk of euro member leaving club at 7 pct The risk of a euro member leaving the single currency next year is only about 7 percent because European Union leaders will use «as many resources as necessary» to prevent a breakup, IHS Global Insight said. The probability of any one country leaving the euro region in the next five years is 20 percent, IHS economists including London-based Howard Archer and Timo Klein in Frankfurt said in a note to clients released yesterday. The chance of a «more extreme breakup» by 2015 is 5 percent, they said. The EU and the International Monetary Fund have approved rescue packages for Ireland and Greece this year after concerns about the sustainability of government finances pushed up bond yields. The most likely outcome is that the 16-nation euro area will remain intact as the will of European leaders to hold the alliance together may be underestimated, IHS said. «A breakup would unravel decades of European political and economic integration and severely damage the common market,» the economists said. «Confronted with this risk, Europe will marshal huge political efforts and resources to prevent a breakup as no economic argument can supersede the political objective.» Still, «the current financial stress in some countries is unprecedented, and internal actions to stabilize finances and restore competitiveness might become too painful to endure,» they said. (Bloomberg) Croatian steps Croatia made progress yesterday toward completing its European Union accession, wrapping up negotiations on issues such as police, border controls, foreign policy and visa rules. But EU officials warned Zagreb it still had to show more effort in combating corruption and crime and convincing member governments that its judiciary reforms are showing results, if it wants to meet its goal of finishing talks in 2011. «Croatia has clearly been making good progress in terms of meeting EU accession criteria and we can safely say the conclusion of negotiations is within reach now,» Belgian Foreign Minister Steven Vanackere, who oversaw talks between Croatia and EU governments, told a news conference. «But it is clear further effort is required,» he said. (Reuters) PPC deal Public Power Corp SA and Spain’s Actividades de Construccion y Servicios SA unit Urbaser SA have received European Commission approval to set up a joint venture to explore opportunities in waste management and related power production, according to an e-mailed statement from Athens-based PPC yesterday. Greece’s biggest electricity producer first announced plans to set up the company with Urbaser on April 28. (Bloomberg)
