Breaking:
ATHENS (Dow Jones)–Greece’s 2010 budget gap is expected to reach 9.3 per cent of gross domestic product, well above the country’s target, forcing the government to implement further spending cuts to bring its fiscal reforms back on track, a senior government official said Thursday.
The official also told Dow Jones Newswires that Greece’s budget deficit last year is expected to be revised sharply higher, to above 15 per cent of GDP, up from the current estimate of 13.8 per cent.
That news, which was forecast in the Greek paper Kathimerini, on Thursday morning, throws up an interesting question, according to Evolution’s Gary Jenkins:
As part of the €110bn support package agreed by the EU/IMF the target deficit was set at 8.1 per cent. Thus unless I am missing something the EU/IMF could if they so wished renegotiate terms of the deal or even withhold the cash advances. Not saying they will because once you start this kind of bail out it is difficult to stop, but it at least increases the short term risks for bondholders. Considering this and the tone of the day generally it was slightly surprising that Greek 10 year yields were only 23bps wider at 11.55 per cent.
Indeed.
The Greek ten-year is currently only 12bps wider, although the CDS has risen.
GREEK 5-YEAR CDS RISES BY 12 BPS ON DAY TO 890 BPS – MARKIT
Related links:
Top of the bond yield to you – FT Alphaville
Make European defaults – not bailouts, think tank says - FT Alphaville
Beyond Europe’s bailout fund – a Q&A - FT Alphaville