Friday, April 23, 2010

Greece Budget Gap Worse Than Feared; Bonds Approach Pakistan Levels; Greek Bond Crash In Pictures

With Thursday's admission that Greece's budget gap is worse than expected, CDS rates on Greek debt rose to new highs, and Greek bond crashed.

Charts follow a discussion of articles in the news.

Yahoo Finance is reporting Greek deficit spiked to 13.6 percent of national income in 2009, more than previous estimate
http://finance.yahoo.com/news/Greek-bud ... et=&ccode=

Financially-stricken Greece had an even bigger budget deficit for 2009 than previously thought, official figures showed Thursday -- tough news at a time when the country is considering whether to tap a bailout facility from its 15 partners in the eurozone and the International Monetary Fund.

The European Union's statistics office Eurostat said that Greece's budget deficit in 2009, as a percentage of economic output, was 13.6 percent. That's up from the previous estimate of 12.9 percent and nearly double the 7.7 percent recorded in 2008.

Greece's total government debt as a proportion of GDP stands at a massive 115.1 percent, a burden so large that some analysts think it will have trouble paying it over coming years even if a bailout saves Athens from default this year.

Eurostat also warned that the Greek figures may actually be even worse, citing "uncertainties" over the figures related to social security funds and the recording of complex financial swap arrangements.

"Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek statistical authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt," Eurostat said.

Greece Debt Downgraded, Yields Spike

Please consider Greece downgraded, deficit worse than feared http://www.reuters.com/article/idUSTRE63L20N20100422

Greece's budget gap last year was worse than feared, the European Union's statistics office revealed on Thursday, as Moody's Investors Service downgraded its rating of Greek government debt.

The news triggered a fresh slide of asset prices in Greece and other debt-choked European countries, and increased pressure on Athens to seek billions of euros of emergency loans from the EU and the International Monetary Fund.

Greece's two-year government bond yield soared four percentage points to 12.26 percent as investors bet the country would need a bailout to avoid restructuring its debt or defaulting. Athens will have to refinance 8.5 billion euros ($11.3 billion) of bonds maturing on May 19.

In a brief statement, the Greek Finance Ministry insisted the new numbers would not change its intention to shrink the deficit by four percentage points this year. It said measures already taken would be enough to cut the deficit by six points.

But both Athens and EU officials appeared to be backing away from a previously announced target for Greece to slash the deficit to 8.7 percent of GDP this year.

"The target for 2010 is a four percentage point reduction of the deficit. We did not refer to the starting point or the arrival figure, only the reduction effort," European Commission spokesman Amadeu Altafaj said in Brussels. "Greece is on track to meet the target for 2010; that is what counts."

No Target?

Greece does not even have a formal target for debt reduction, just a percentage off the high, and that budget gap hit a fresh high on Thursday. Excuse me but didn't the EU sign off on Greece's budget gap? Didn't the EU sign off on Greece's austerity plan?

I have still more questions. Will Greece's budget gap rise again next month? In June? August? When will we know the top is in?

By the way, European Commission spokesman Amadeu Altafaj statement is a purposeful lie at worst and puts a bow tie on a muddy pig at best. When the EU signed off on Greece's plan, it was presented by the EU as if the nature of the problem was understood, not growing.

Italian Prime Minister Blames EU For Greek Bond Price Debacle

One might think that the magnitude of the Greek budget crisis, exposed lies about how big the crisis is, and an admission that the problem may get worse yet is ample explanation for the Greek bond crash.

But No! Prodi Says Lack of EU Support Hurt Greek Bond Prices. http://www.bloomberg.com/apps/news?pid= ... 1nPU&pos=6

Greek bonds are falling because European Union nations failed to take decisive action to restore confidence in Greece’s finances, former European Commission President and Italian Prime Minister Romano Prodi said.

Criticizing “the weakness of European solidarityâ€