Jens Bastian – When solidarity with Greece is in high demand but low supply

The government of Prime Minister George Papandreou had hoped that the European Union Council meeting at the end of March in Brussels would provide an unambiguous political statement of solidarity with Greece. This statement of intent sought to send a clear signal to international capital markets that forthcoming sales of Greek sovereign bonds during the crucial months of April and May could be priced at lower interest rates than during the past six months.
If we take the sale of 5 billion euros’ worth of seven-year bonds to refinance Greek debt on March 29 priced to yield 5.9 percent and the additional 390 million euros of sovereign bonds sold a day later during the reopening of an existing 20-year bond, then the conclusion is rather sobering. Neither has the hoped-for signal of solidarity been received nor has the Greek government been given a vote of confidence by international bond markets.
The immediate consequences of this unsatisfactory situation are politically and economically highly charged: Concerns are rising within the government in Athens that the positive effects of the initiated budgetary corrections, expenditure cuts and tax increases risk will be neutralized. The exorbitantly high and multiyear interest rates that have to be borne by the government for the sale of short-, medium- and longterm debt obligations on international bond markets are eating away at the government’s austerity efforts and structural reform initiatives.
Read the entire article in ATHENS PLUS / page 10