|
European finance ministers are due to come to a decision regarding a second bailout to be given to Greece. The meeting, which started on Monday 12th March, will also see at the centre of discussions Spain, which has missed the target of 4.4% of GDP in deficit target for 2012, agreed with Brussels. In fact, due to poor economic performance, Spain will face a deficit of 5.8%. It is of fundamental importance for Spain to fulfil its commitment and cut down its debt, bringing it down to 3% of GDP by 2013, as agreed with the Eurogroup. In order to accomplish this tough goal, Spain and its new government are planning €30bn ($39bn) of spending cuts. Even though it is far from being considered a potential 'new Greece', many analysts consider Spain at risk due to the last years of economic immobility and lack of leadership of the Zapatero government which have caused concern within the Euro zone as well as outside. Going back to Greece, a final agreement is expected this week which will settle a second bailout of €130bn (worth more than $170bn), the largest a country has ever received. On Thursday 15th, the IMF (International Monetary Fund) will also decide how much it will contribute to the eurozone bailout; this will probably reach a quite substantial sum of about €28bn (which, with the current forex rates, would amount to nearly $37bn). Greece has finally agreed a debt swap where investors have accepted to buy new Greek bonds in exchange for the old ones. The new bonds, with 30-year-long maturities, were yielding over 13%, nearly 10 points up from the original 3.65%. Those lenders who have lost money in the swap will then be compensated by the International Swaps and Derivatives Association. This follows the news that a group of lenders have gathered together in a class action suit against Greece. The group of lenders, supported by a team of lawyers in Germany, are claiming thousands of Dollars of loss in the swap process, with banks accused of not being clear with their clients with regards to the potential risks of investing in the Greek country. What does all this mean? Greece will pay less than half of its $325 debts in an attempt to reduce its total indebtedness to 120% of GDP by 2020 (from the current astonishing figure of 160%). The risk is now that some lenders, having already lost large amount of money in the Greek swap, will decide not to back Greece. In the meantime, it seems that a quarter of Greece’s debts are owned by hedge funds, which, unlike pension funds, can bet in the market, therefore play a way too big role in the future of a country that is getting too used to the struggle.
Related Articles -
Greece, europe, bailout, recession, hedge funds, euro, ,
|
