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Greece may restructure some of its debt

Stephen Beard Dec 24, 2010

Greece may restructure some of its debt

Stephen Beard Dec 24, 2010


Kai Ryssdal: Sadly, there’s not much holiday cheer for holders of European government bonds right now. They’ve had to digest some fairly unpalatable news this week. Credit downgrades for both Portugal and Hungary. Developments in Greece today are causing some concern, too. Greek bond prices, and the cost of insuring against a default by the government in Athens, are rising amid reports that the market is not at all sure how financially sound Greece might be — even after a bailout.

From the European Desk in London, Marketplace’s Stephen Beard has more.

STEPHEN BEARD: A newspaper in Athens carried the story. It claimed the Greek government is planning to renegotiate some of its loans. That would be tantamount to default, the first time for a developed European country since the Second World War. The Greek government denied the story.

But economist Andrew Hilton says something like this is inevitable.

ANDREW HILTON: Certainly I think there will have to be a restructuring of debt on the part of the Greeks and that restructuring of debt will mean that creditors take a hit.

Greece and Ireland have both been bailed out by the European Union and the IMF. They’re protected from default until 2013.

But Stephen Lewis of Monument Securities says investors are fretting about what happens after that protection expires.

STEPHEN LEWIS: There’s not a lot of confidence that the hard-pressed countries will be in any better position to service their debt in three years’ time than they are at present.

That lack of confidence is spreading to other much bigger and heavily indebted euro countries like Spain and even Italy. Their governments must borrow hundreds of billions next year.

Steve Barrow of Standard Bank thinks they’ll struggle to raise the money, and that will put the euro under more pressure.

STEVE BARROW: I do have a sense that the market is lining up to sell the euro in the early part of next year. The first part of 2011, the first quarter, could be a very difficult period for the eurozone.

Even before Christmas, it’s safe to safe to say, it won’t be a happy new year for the euro.

In London this is Stephen Beard for Marketplace.

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