Greece is in debt, to the point where its desperate citizens have taken to the streets in protest. Fitch recently downgraded the nation’s credit rating to BBB-, which is among the lowest scores accessible. The European Union might make debt relief possible for Greece, but only if they’re prepared to contribute numerous billions of Euros in the name of Greece’s debt. Sky News Online reports that when Greece could have to borrow in order to cover its 8.5 billion-euro debt – which comes to maturity on May 19 – Greece’s national debt now bares the albatross of junk status. The result of junk status is that holders of outstanding 10-year Greek sovereign bonds are now requiring a lot more than a 10 percent rate of return from the government. For the record, says Sky News, that’s the highest bond rate of return ever seen in the eurozone.
How junk rating makes Greece debt bad for investors
Sky News indicates that junk status for the Greece debt places “big investors like pension funds” in a position where they “will no longer be allowed to purchase the country’s debt.” Shrinking options could not come at a worse time for Greece, as its debt status places it within the very same credit bracket as Colombia, Romania and Azerbaijan. Greek citizens are desperate for solutions to separate Greece from debt; their protests outside the offices of the finance ministry are but one sign. If Greece and massive debt are not soon parted, said KBC Securities economist Koen De Leus to Sky News, the entire European market will suffer. The euro has already suffered of late in comparison to the American dollar (hitting a new one-year low) and European Union stock markets have faltered. This impacted the Dow Jones also, which experienced a 200-point drop by the end of trading.
Papaconstantinou says Greece will pay debt ‘absolutely and without any doubt’
Investor confidence is vital for Greece and their debt at this time, but few are confident that Finance Minister George Papaconstantinou’s bold prediction will come to pass. Britain’s Chancellor of the Exchequer Alistair Darling said in a joint meeting of the International Monetary Fund, European Central Bank and other financial organizations that it is “absolutely essential” the problem of the Greece debt be handled “quickly, effectively and decisively.” Payday loans will play a role, but the amount of money Greece needs necessitates significant aid from the entire European Union.
Resources for the article
Sky News Online
http://news.sky.com/skynews/Home/World-News/Greeces-Sovereign-Debt-Downgraded-To-Junk-Status-Sending-Stock-Markets-Tumbling/Article/201004415621202?f=rss
