A report came out suggesting that Greece wanted to change the recent Europe-IMF aid plan, in order to avoid the fiscal austerity measures, and Greek bond spreads exploded as investors routed from Greek bonds overnight.
Yields on 2-year Greek debt rose an astonishing 95 basis points to hit 6.60%.
Now, Greek officials are rushing out control the damage and deny the contents of the aforementioned report, post the market reaction.
According to Reuters, an official has attempted to counter claims of wanting to skirt the IMF, saying, “There is no request from Greece to renegotiate the agreement. There is a deal on the support mechanism and we are sticking to it.”
So let’s face it… Greece has turned into Europe’s 13-year old economy.
It is immensely terrified of how markets perceive it, given the country’s precarious debt situation. Even current levels of interest cost demanded from the marketplace are clearly unsustainable based on even simple maths, thus the rush to clarify official positions at even the smallest sign of market jitters.
Yet also like an adolescent, the nation doesn’t see the incongruity of repeatedly biting the hand that feeds it. Greece has been defiantly attacking Germany and Europe over how it should be bailed out, even accusing Germany of playing a race card. Protesters oppose efforts to bring rampant over-spending under control, at the same time outraged that markets should punish their actions while simultaneously being financed by markets to meet their current standard of living.
In a third parallel to adolescence, the nation isn’t supporting itself either. Greek debt would be trading at far higher yields (lower prices) if the nation didn’t have an implicit promise of support from Europe. If Greece were forced to pay substantially higher yields, it would most likely face an acute financial crisis. This is because even current yields aren’t sustainable.
Thus Greece is Europe’s 13-year old, but its lack of financial independence means that this isn’t by choice. It is simply the harsh reality.
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