Almunia: Greece Backed By EU, Will 'Never' Default
(Adds Almunia's comment on potential Greek bond sales to China, background on Greece's credit spread, budget deficit forecast)
By Joy C. Shaw
Of DOW JONES NEWSWIRES
NANJING, China (Dow Jones)--Greece will "never" default on its sovereign debt because the country has the backing of the European Union, Joaquin Almunia, the European economic and monetary affairs commissioner, said Sunday.
"Being part of the E.U., Greece is sort of protected," Almunia said on the sideline of a Eurogroup meeting with high-ranking Chinese officials in the eastern Chinese city of Nanjing. "[It] will have to pay more [for its bonds]." But default risk is near zero because of the E.U. backing, he said.
He said Greece's sovereign credit spread widened recently because of its rising budget deficit, the impact of the global financial crisis and, more recently, global market jitters driven by Dubai World's debt woes.
Almunia said he has not heard that Greece is in talks with certain Chinese banks to sell some of its government bonds.
The Greek government is trying to sell at least EUR25 billion worth of bonds to Chinese banks as part of its efforts to refinance the country's massive public debt, a person familiar with the situation told Dow Jones Newswires Friday.
The Greek government forecasts its budget deficit will hit 12.7% of gross domestic product this year--the highest in the euro zone and double its forecasts from just two months ago.
The country's debt spreads have blown out, with the 10-year Greek government bond yield 208 basis points above the corresponding German bund, the widest spread within the euro zone. Athens plans to issue around EUR60 billion in bonds next year.
A massive investment from the cash-rich Chinese could be seen as a vote of confidence for Athens, which is straining euro-zone fiscal limits and facing worries that ratings agencies might further downgrade its sovereign debt. |
