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In early 2010 fears of a [[sovereign debt]] crisis<ref>{{cite news|title= Five Threats to the Common Currency |url= http://www.spiegel.de/international/europe/0,1518,677214,00.html |author= Stefan Schultz |publisher= [[Spiegel Online]] |date=2010-02-11 |accessdate=2010-04-28}}</ref> developed concerning some countries in the Euro Area,<ref>{{cite news|url= http://www.reuters.com/article/idUSLDE61F0W720100216 |title= Peripheral euro zone government bond spreads widen |publisher=[[Reuters]] |author= George Matlock |date=2010-02-16 |accessdate=2010-04-28}}</ref> specifically: [[Greece]], [[Ireland]],<ref>{{cite news|url= http://www.thenewamerican.com/index.php/world-mainmenu-26/europe-mainmenu-35/3274-greek-debt-crisis-worsens |author= Bruce Walker |date=2010-04-09 |publisher= [[The New American]] |accessdate=2010-04-28}}</ref> and [[Portugal]].<ref name=wsj>{{cite web | author = Brian Blackstone, Tom Lauricella, and Neil Shah | title = Global Markets Shudder: Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery | publisher = [[The Wall Street Journal]] | date = 5 February 2010 | url = http://online.wsj.com/article/SB20001424052748704041504575045743430262982.html | accessdate = 6 February 2010}}</ref> This led to a crisis of confidence as well as the widening of [[bond (finance)|bond]] yield spreads and risk insurance on [[credit default swaps]] between these countries and other [[Eurozone]] members, most importantly [[Germany]]<ref>[http://www.financialmirror.com/News/Cyprus_and_World_News/20151 Greek/German bond yield spread more than 1,000 bps]</ref>.
In early 2010 fears of a [[sovereign debt]] crisis<ref>{{cite news|title= Five Threats to the Common Currency |url= http://www.spiegel.de/international/europe/0,1518,677214,00.html |author= Stefan Schultz |publisher= [[Spiegel Online]] |date=2010-02-11 |accessdate=2010-04-28}}</ref> developed concerning some countries in the Euro Area,<ref>{{cite news|url= http://www.reuters.com/article/idUSLDE61F0W720100216 |title= Peripheral euro zone government bond spreads widen |publisher=[[Reuters]] |author= George Matlock |date=2010-02-16 |accessdate=2010-04-28}}</ref> specifically: [Greece]], Ireland,<ref>{{cite news|url= http://www.thenewamerican.com/index.php/world-mainmenu-26/europe-mainmenu-35/3274-greek-debt-crisis-worsens |author= Bruce Walker |date=2010-04-09 |publisher= [[The New American]] |accessdate=2010-04-28}}</ref> and Portugal.<ref name=wsj>{{cite web | author = Brian Blackstone, Tom Lauricella, and Neil Shah | title = Global Markets Shudder: Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery | publisher = [[The Wall Street Journal]] | date = 5 February 2010 | url = http://online.wsj.com/article/SB20001424052748704041504575045743430262982.html | accessdate = 6 February 2010}}</ref> This led to a crisis of confidence as well as the widening of [[bond (finance)|bond]] yield spreads and risk insurance on [[credit default swaps]] between these countries and other [[Eurozone]] members, most importantly Germany]]<ref>[http://www.financialmirror.com/News/Cyprus_and_World_News/20151 Greek/German bond yield spread more than 1,000 bps]</ref>.


Concern about rising [[Deficit spending#Government deficits|government deficits]] and [[Government debt|debt]] levels<ref name="telegraph.co.uk">{{cite news|title= Britain's deficit third worst in the world, table |url= http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7269629/Britains-deficit-third-worst-in-the-world-table.html |publisher= [[telegraph.co.uk]] |date=2010-02-19 |accessdate=2010-04-29}}</ref><ref>[http://blogs.ft.com/money-supply/files/2010/01/misery.gif Fiscal Deficit and Unemployment Rate, FT]</ref> across the globe together with a wave of downgrading of European Government debt<ref>{{cite news|title= Timeline: Greece's economic crisis |url= http://www.reuters.com/article/idUSTRE6124EL20100203 |date=2010-02-03 |accessdate=2010-04-29 |publisher= Reuters}}</ref> has created alarm on financial markets. The debt crisis has been mostly centred on recent events in Greece, where there is concern about the rising cost of financing government debt. On May 2, the [[Eurozone]] countries and the [[International Monetary Fund]] agreed to a €110 billion loan for Greece, conditional on the implementation of harsh Greek [[austerity]] measures.<ref>{{Cite web | last = | first = | title = Greece Accepts Terms of EU-Led Bailout, ‘Savage’ Cuts (Update1) - Bloomberg.com | url = http://www.bloomberg.com/apps/news?pid=20601087&sid=a9f8X9yDMcdI&pos=1 | publisher = | date = | accessdate = 2 May 2010 }}</ref>
Concern about rising [[Deficit spending#Government deficits|government deficits]] and [[Government debt|Government debt]] levels<ref name="telegraph.co.uk">{{cite news|title= Britain's deficit third worst in the world, table |url= http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7269629/Britains-deficit-third-worst-in-the-world-table.html |publisher= [[telegraph.co.uk]] |date=2010-02-19 |accessdate=2010-04-29}}</ref><ref>[http://blogs.ft.com/money-supply/files/2010/01/misery.gif Fiscal Deficit and Unemployment Rate, FT]</ref> across the globe together with a wave of downgrading of European Government debt<ref>{{cite news|title= Timeline: Greece's economic crisis |url= http://www.reuters.com/article/idUSTRE6124EL20100203 |date=2010-02-03 |accessdate=2010-04-29 |publisher= Reuters}}</ref> has created alarm on financial markets. The debt crisis has been mostly centred on recent events in Greece, where there is concern about the rising cost of financing government debt. On May 2, the [[Eurozone]] countries and the [[International Monetary Fund]] agreed to a €110 billion loan for Greece, conditional on the implementation of harsh Greek [[austerity]] measures.<ref>{{Cite web | last = | first = | title = Greece Accepts Terms of EU-Led Bailout, ‘Savage’ Cuts (Update1) - Bloomberg.com | url = http://www.bloomberg.com/apps/news?pid=20601087&sid=a9f8X9yDMcdI&pos=1 | publisher = | date = | accessdate = 2 May 2010 }}</ref>


==Greek government funding crisis==
==Greek government funding crisis==

Revision as of 12:13, 5 May 2010

In early 2010 fears of a sovereign debt crisis[1] developed concerning some countries in the Euro Area,[2] specifically: [Greece]], Ireland,[3] and Portugal.[4] This led to a crisis of confidence as well as the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other Eurozone members, most importantly Germany]][5].

Concern about rising government deficits and Government debt levels[6][7] across the globe together with a wave of downgrading of European Government debt[8] has created alarm on financial markets. The debt crisis has been mostly centred on recent events in Greece, where there is concern about the rising cost of financing government debt. On May 2, the Eurozone countries and the International Monetary Fund agreed to a €110 billion loan for Greece, conditional on the implementation of harsh Greek austerity measures.[9]

Greek government funding crisis

Causes

The Greek economy was one of the fastest growing in the eurozone during the 2000s. From 2000 to 2007 it grew at an annual rate of 4.2% as foreign capital flooded the country[10]. A strong economy and falling bond yields allowed the government of Greece to run large structural deficits. Since the introduction of the Euro, debt to GDP has remained above 100%.[11] The global financial crisis that began in 2008 had a particularly large effect on Greece. Two of the country's largest industries are tourism and shipping, and both were badly affected by the downturn with revenues falling 15% in 2009.[11]

To keep within monetary union guidelines, the government of Greece has been accused of misreporting the statistics.[12] In 2009 the government of George Papandreou revised its deficit from 5% to 12.7%.[13] The Greek government deficit is currently estimated to be 13.6%[14] which is one of the highest in the world relative to GDP[15]. Greek government debt was estimated at €216 billion in January 2010.[16] Accumulated government debt is forecast, according to some estimates, to hit 120% of GDP this year.[17] The Greek government bond market is reliant on foreign investors, with some estimates suggesting that up to 70%[citation needed] of Greek government bonds are held externally[18]. Estimated tax evasion costs the Greek government over $20 billion per year.[19]

Despite the crisis, Greek government bond auctions have all been over-subscribed in 2010 [1]. According to the Financial Times on January 25, 2010 "Investors placed about €20bn ($28bn, £17bn) in orders for the five-year, fixed-rate bond, four times more than the (Greek) government had reckoned on." In March, again according to the Financial Times, "Athens sold €5bn (£4.5bn) in 10-year bonds and received orders for three times that amount.[20]"

Downgrading of debt

On 27 April 2010, the Greek debt rating was decreased to 'junk' status by Standard & Poor's amidst fears of default by the Greek government.[21] Yields on Greek government two-year bonds rose to 15.3% following the downgrading.[22] Some analysts question Greece's ability to refinance its debt. Standard & Poor's estimates that in the event of default investors would lose 30–50% of their money.[21] Stock markets worldwide declined in response to this announcement.[23]

Following downgradings by Fitch, Moody's and S&P,[24] Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds.[25] Although all Greek government bond auctions this year have been over subscribed, yields have risen, particularly in the wake of successive ratings downgrading. According to the Wall Street Journal "with only a handful of bonds changing hands, the meaning of the bond move isn't so clear."[26]

On May 3, the ECB's suspended its minimum threshold for Greek debt "until further notice"[27] which means the bonds will remain eligible as collateral even with junk status. The decision will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors[28]. Following the introduction of these measures the yield on Greek 10-year bonds fell to 8.5 percent, 550 basis points above German yields, down from 800 basis points earlier[29].

Austerity and Loan agreement

On March 5, 2010, the Greek parliament passed the Economy Protection Bill, expected to save €4.8 billion [30] through a number of measures including public sector wage reductions. Passage of the bill occurred amid widespread protests against government austerity measures in the Greek capital, Athens.[31] On 23 April 2010, the Greek government requested that the EU/IMF bailout package be activated.[32] The IMF has said it was "prepared to move expeditiously on this request".[33] Greece needs some of the money before 19 May, when it faces a debt roll over of $11.3bn.[34][35][36] On May 2, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consists of an immediate 45 billion euros in low interest loans to be provided this year, with more funds available later. A total of 100 billion euros has been agreed.[37][38] The government of Greece agreed to impose a fourth and final round of austerity measures. These include:[39]

  • In the Public Sector a limit introduced of 1000 Euros to 13th and 14th month salary payments, abolished entirely for those earning over 3,000 Euros a month.
  • Cuts of 8% on public sector allowances and 3% pay cut for DEKO (public sector utilities) pay cheques.
  • Freeze on increases in public sector wages for three years.
  • Limit of 800 Euros to 13th and 14th month pension installment . Abolished for those pensioners receiving over 2,500 Euros a month.
  • Return of special tax (LAFKA) on high pensions.
  • Changes planned to the laws governing lay-offs and overtime pay.
  • Extraordinary taxes on company profits.
  • Increases in VAT to 23%, 11% and 5.5%.
  • 10% rise in taxes on alcohol, cigarettes, and fuels.
  • 10% increase in luxury taxes.
  • Equalisation of men's and women's pension age limits.
  • General pension age does not change but a mechanism is introduced to scale them to life expectations changes.
  • Creation of a financial stability fund.

Danger of default

Without a bailout agreement, there was a possibility that Greece would have been forced to default on some of its debt. The premiums on Greek debt had risen to a level that reflected a high chance of a default or restructuring. One analyst gave a 80 to 90% chance of a default or restructuring.[40] Martin Feldstein called a Greek default "inevitable."[41] A default would most likely have taken the form of a restructuring where Greece would pay creditors only a portion of what they were owed. Perhaps 50 or 25%[42] This would effectively remove Greece from the Euro, as it would no longer have collateral with the European Central Bank.[43] It would also destabilize the Euro Interbank Offered Rate, which is backed by government securities.[44]

The overall effect of Greece being forced off the euro, would itself have been small for the other European economies. Greece represents only 2% of the eurozone economy.[43] The more severe danger is that a default by Greece will cause investors to lose faith in other European countries. This concern is focused on Portugal, Ireland, Spain, and Italy, all of whom have high debt and deficit issues.[45] Spain and Italy are far larger and more central economies, and a default by either of them would have dramatic repercussions. Both countries have most of their debt controlled internally, and are in a better fiscal situation than Greece and Portugal making a default unlikely unless the situation gets far more severe.[46]

Objections to proposed policies

The crisis is seen as a justification for imposing fiscal 'austerity'[47] on Greece in exchange for European funding which would lower borrowing costs for the Greek government[48]. The negative impact of tighter fiscal policy could offset the positive impact of lower borrowing costs and social disruption could have a significantly negative impact on investment and growth in the longer term.

An alternative to the bailout agreement, would have been Greece leaving the Eurozone. Wilhelm Hankel, emeritus professor of economics at the University of Frankfurt am Main suggested [49] in an article published in the Financial Times that the preferred solution to the Greek bond 'crisis' is a Greek exit from the Euro followed by a devaluation of the currency. Fiscal austerity or a Euro exit is the alternative to accepting differentiated government bond yields within the Euro Area. If Greece remains in the Euro while accepting higher bond yields, reflecting its high government deficit, then high interest rates would dampen demand, raise savings and slow the economy. An improved trade performance and less reliance on foreign capital would result.

Possible spread beyond Greece

The government surplus/deficit of Portugal, Italy, Ireland, Greece, United Kingdom, and Spain against the European Union and Eurozone 2002-2009.

One of the central concerns prior to the bailout was that the crisis could spread beyond Greece. The crisis has reduced confidence in other Eurozone economies. Ireland, with a government deficit of 14.3 percent of GDP, Spain with 11.2 percent, and Portugal at 9.4 percent are most at risk.[50] In April 2010, following a marked increase in Irish 2-year bond yields, Ireland's NTMA state debt agency said that it had "no major refinancing obligations" in 2010. Its requirement for €20 billion in 2010 was matched by a €23 billion cash balance, and it remarked: "We're very comfortably circumstanced".[51]

According to the Financial Times: "So far, investors have concentrated their ire on peripheral eurozone economies because of the zone's inability to resolve cleanly the Greek crisis. That is understandable, say many economists, but they add that the focus on continental Europe is unfair."[52]

Niall Ferguson writes that "the sovereign debt crisis that is unfolding ... is a fiscal crisis of the western world".[53] Financing needs for the Eurozone in 2010 come to a total of €1.6 trillion, while the US is expected to issue US$1.7 trillion more Treasury securities in this period,[54] and Japan has ¥213 trillion of government bonds to roll over.[55] The countries most at risk are those that rely on foreign investors to fund their government sector. According to Ferguson similarities between the U.S. and Greece should not be dismissed[56].

This year the OECD forecasts $16,000bn will be raised in government bonds among its 30 member countries. Greece has been the notable example of an industrialised country that has faced difficulties in the markets because of rising debt levels. Even countries such as the US, Germany and the UK, have had fraught moments as investors shunned bond auctions due to concerns about public finances and the economy[57]. According to the Niall Ferguson in the Financial Times "Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries by the Federal Reserve and reserve accumulation by the Chinese monetary authorities. But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year."[58]

Long term solutions

European Union leaders have made two major proposals for ensuring fiscal stability in the long term. The first proposal is the creation of a common fund responsible for bailing out, with strict conditions, a EU member country. This reactive tool is sometimes dubbed as the European Monetary Fund by the media.[59] The second is a single authority responsible for tax policy oversight and government spending coordination of EU member countries. This preventive tool is dubbed the European Treasury.[60] The monetary fund would be supported by EU member governments, and the treasury would be supported by the European Commission. However, strong European Commission oversight in the fields of taxation and budgetary policy and the enforcement mechanisms that go with it have been described as infringements on the sovereignty of eurozone member states [61] and are opposed by key EU nations such as France and Italy, which could jeopardize the establishment of a European Treasury.

Some think-tanks such as the CEE Council have argued that the predicament some EU countries find themselves in is the result of a decade of debt-fueled Keynesian policies pursued by local policy makers and complacent EU central bankers,[62] and have recommended the imposition of a battery of corrective policies to control public debt. Some senior German policy makers went as far as to say that emergency bailouts should bring harsh penalties to EU aid recipients such as Greece.[63] Others argue that an abrupt return to “non-Keynesian” financial policies isn’t a viable solution and predict the deflationary policies now being imposed on countries such as Greece and Spain might prolong and deepen their recessions.[64]

Regardless of the corrective measures chosen to solve the current predicament as long as cross border capital flows remain unregulated in the Euro Area [2], asset bubbles [3] current account imbalances are likely to continue. The suggestion has been made that long term stability in the eurozone requires a common fiscal policy rather than controls on portfolio investment.[65] In exchange for cheaper funding from the EU, Greece and other countries, in addition to having already lost control over monetary policy and foreign exchange policy since the Euro came into being, would therefore also lose control over domestic fiscal policy.

Controversies

Role of credit rating agencies

The international credit rating agencies – Moody's, S&P and Fitch – have played a central[66] and controversial role[67] in the current European bond market crisis.[68] As with the housing bubble[69][70] and Iceland crisis[71][72], the ratings agencies have been under fire. In the current bond market crisis the agencies have been accused of conflict of interest[73] In the case of Greece, the market responded to the crisis before the downgrades, with Greek bonds trading at junk levels several weeks before the ratings agencies began to describe them as such. Germany's foreign minister suggested the European Union should create its own rating agency. He spoke after downgrades of Greece and Portugal roiled financial markets.[66]

Government officials have criticized the ratings agencies and the German finance minister has said traders should not take global rating agencies "too seriously" following downgrades of Greece, Spain and Portugal. Guido Westerwelle, German foreign minister, called for an "independent" European rating agency, which could avoid the conflicts of interest that he claimed US-based agencies faced.[74] According to the Financial Tmes "The latest furore over the agencies’ role in the sovereign debt market"[74] is likely to bring about more supervision of these agencies.

European leaders are reportedly studying the possibility of setting up a European ratings agency in order that the U.S.-based ratings agencies have less influence on developments in European financial markets in the future.[75][76] Due to the failures of the ratings agencies, European regulators will be given new powers to supervise ratings agencies.[67] These supervisory powers will come into effect in December 2010.

In a response to the actions of the U.S. based ratings agencies the ECB announced on May 3 that it will accept as collateral all outstanding and new debt instruments issued or guaranteed by the Greek government, regardless of the nation's credit rating[77].

Media

There has been considerable controversy about the role of the English-language press in the regard to the bond market crisis[78][79]. The Spanish Prime Minister has ordered Spanish intelligence services to investigate the role of the Anglo-Saxon media in fomenting the crisis[80][81][82][83]. No results have so far been reported as a result of this investigation.

According to the Spanish newspaper "El Pais" "the National Intelligence Center (CNI) was investigating "whether investors' attacks and the aggressiveness of some Anglo-Saxon media are driven by market forces and challenges facing the Spanish economy, or whether there is something more behind this campaign.""[84][85][86]. The Spanish Prime Minister has suggested[87] that the recent financial market crisis in Europe is an attempt to draw international capital away from the Euro[88] in order that countries, such as the U.K. and the U.S. can continue to fund their large external deficits which are matched by large government deficits[6]. The U.S. and U.K. do not have large domestic savings pools to draw on and therefore are dependant on external savings[89]. This is not the case in the Euro Area which is self funding[90].

The Greek Prime Minister Papandreou is quoted as saying that there was no question of Greece leaving the euro and suggested that the ­crisis was politically as well as financially motivated. "This is an attack on the eurozone by certain other interests, political or financial"[91].

Role of speculators

Speculators and hedge funds engaged in selling Euros have also been accused by both the Spanish and Greek Prime Ministers of worsening the crisis[92][93]. Angela Merkel has stated that "institutions bailed out with public funds are exploiting the budget crisis in Greece and elsewhere".[94]

The role of Goldman Sachs [95] in the Greek bond 'crisis' is also under scrutiny [96]. It is not yet clear to what extent this bank has been involved in the unfolding of the crisis or if they have made a profit as a result of the sell-off on the Greek government debt market.

Timeline of Greek crisis

Below is a brief summary of some of the main events in the Greek Sovereign debt crisis.[97]

October 2009

  • A new Greek government is formed after the election, led by PASOK, which received 43.92 % of the popular vote, and 160 of 300 parliament seats.

November 2009

  • 5 Nov.: New budget draft reveals a deficit of 12.7% of GDP, more than twice the previously announced figure.
  • 8 Nov.: Final budget draft aims to cut deficit to 8.7% of GDP in 2010. Draft also projects total debt rising to 121% of GDP in 2010 from 113.4% in 2009.

December 2009

  • Dec. 8: Fitch Ratings cuts Greece's rating to BBB+ from A-, with a negative outlook.
  • Dec. 14: Greek PM Papandreou outlines first round of policies to cut deficit and regain investor trust.
  • Dec. 16: S&P cuts Greece's rating to BBB+ from A-.
  • Dec. 22: Moody's cuts Greece's rating to A2 from A1.

January 2010

  • Jan. 14: Greece unveils the Stability and Growth Program which aims to cut deficit from 12.7% in 2009 to 2.8% in 2012.
  • Jan. xx: 5-year bond issue is five-times oversubscribed but yields and spreads rise.

February 2010

  • Feb. 2: Government extends public sector wage freeze to those earning less than EUR 2,000 a month.
  • Feb. 3: EU Commission backs Greece's Stability and Growth Program and urges it to cut its overall wage bill.
  • Feb. 24: One-day general strike against the austerity measures halts public services and transport system.
  • Feb. 25: EU mission in Athens with IMF experts delivers grim assessment of country's finances.

March 2010

  • Mar. 5: New public sector wage cuts and tax increases is passed and estimated to generate savings of EUR 4.8 bn. Measures include increasing VAT by 2% to 21%, cutting public sector salary bonuses by 30%, increases on fuel, tobacco and alcohol consumption taxes and freezing state-funded pensions in 2010.
  • Mar. 11: Public and private sector workers strike.
  • Mar. 15: EMU finance ministers agree on mechanism to help Greece but reveal no details.
  • Mar. 18: Papandreou warns Greece will not be able to cut deficit if borrowing costs remain as high as they are and may have to go to the IMF.
  • Mar. 19: European Commission President José Manuel Barroso urges EU member states to agree a standby aid package for Greece. Barroso says the EMU countries should be on stand by to make bilateral loans.
  • Mar. 25: ECB President Jean-Claude Trichet says his bank will extend softer rules on collateral (accepting BBB- instead of the standard A-) for longer (up to 2011) in order to avoid a situation where one ratings agency (Moody's) basically decides if an EMU country's bonds are eligible for use as ECB collateral.
  • Mar.: €5bn in 10-year Greek bonds sold - orders for three times that amount are received.

April 2010

  • Apr. 11: EMU leaders agree bailout plan for Greece. Terms are announced for EUR 30 bn of bilateral loans (roughly 5% for a 3-year loan). EMU countries will participate in the amount based on their ECB country keys. Rates for variable rate loans will be 3m-Euribor plus 300 bp + 100 bp for over 3-year loans plus a one-off 50 bp charge for operating expenses. For fixed rate loans rates will be swap rate for the loan's maturity, plus the 300 bp (as in variable) plus the 100 bp for loans over 3 years plus the 50 bp charge.
  • Apr. 13: ECB voices its support for the rescue plan.
  • Apr. 15: Olli Rehn says there is no possibility of a Greek default and no doubt that Germany will participate in the bail out plan. In the mean time there had been serious objections from parts of German society to the country's participation in the Greek bail-out.
  • Apr. Sale of more than 1.5 billion euros Greek Treasury bills met with "stronger-than-expected" demand, albeit at a high interest rate.
  • Apr. 23: Greece officially asks for the disbursement of money from the aid package effectively activating it.
  • Apr. 27: Standard and Poor's downgrades Greece's debt ratings below investment grade to junk bond status.
  • Apr. 27: S&P downgrades Portugese debt two notches and issues negative outlook, warning that further downgrades to junk status are likely. Stock indices around the world drop two to six percent on the news.
  • Apr. 28 S&P downgrades Spanish bonds from AAA to AA-

May 2010

  • May 1: Protests against the proposed austerity measures in Athens.
  • May 2: Greece announces the latest, fourth, raft of austerity measures.
  • May 3: The ECB announces that it will accept Greek Government Bonds as collateral no matter what their rating is. This effectively means scrapping the BBB- floor in the case of Greece and increasing the likelihood of similar announcements in case other countries run the risk of being downgraded to junk status.[98] Global fells dramatically on fears of contagion.[99]

See also

Notes and references

  1. ^ Stefan Schultz (2010-02-11). "Five Threats to the Common Currency". Spiegel Online. Retrieved 2010-04-28.
  2. ^ George Matlock (2010-02-16). "Peripheral euro zone government bond spreads widen". Reuters. Retrieved 2010-04-28.
  3. ^ Bruce Walker (2010-04-09). The New American http://www.thenewamerican.com/index.php/world-mainmenu-26/europe-mainmenu-35/3274-greek-debt-crisis-worsens. Retrieved 2010-04-28. {{cite news}}: Missing or empty |title= (help)
  4. ^ Brian Blackstone, Tom Lauricella, and Neil Shah (5 February 2010). "Global Markets Shudder: Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery". The Wall Street Journal. Retrieved 6 February 2010.{{cite web}}: CS1 maint: multiple names: authors list (link)
  5. ^ Greek/German bond yield spread more than 1,000 bps
  6. ^ a b "Britain's deficit third worst in the world, table". telegraph.co.uk. 2010-02-19. Retrieved 2010-04-29.
  7. ^ Fiscal Deficit and Unemployment Rate, FT
  8. ^ "Timeline: Greece's economic crisis". Reuters. 2010-02-03. Retrieved 2010-04-29.
  9. ^ "Greece Accepts Terms of EU-Led Bailout, 'Savage' Cuts (Update1) - Bloomberg.com". Retrieved 2 May 2010.
  10. ^ http://greeceinfo.wordpress.com/2009/09/17/greece-foreign-capital-inflows-up/
  11. ^ a b "Onze questions-réponses sur la crise grecque - Economie - Nouvelobs.com". Retrieved 2 May 2010.
  12. ^ "EU Stats Office: Greek Economy Figures Unreliable - ABC News". Retrieved 2 May 2010.
  13. ^ "Greece's sovereign-debt crunch: A very European crisis". Retrieved 2 May 2010. {{cite web}}: Text "The Economist" ignored (help)
  14. ^ "Greek Deficit Revised to 13.6%; Moody's Cuts Rating (Update2) - Bloomberg.com". Retrieved 2 May 2010.
  15. ^ "Britain's deficit third worst in the world, table - Telegraph". Retrieved 2 May 2010.
  16. ^ "Greek Debt Concerns Dominate - Who Will Be Next? -- Seeking Alpha". Retrieved 2 May 2010.
  17. ^ "Greek debt to reach 120.8 pct of GDP in '10 - draft". Retrieved 2 May 2010. {{cite web}}: Text "Reuters" ignored (help)
  18. ^ "Greece's sovereign-debt crisis: Still in a spin". Retrieved 2 May 2010. {{cite web}}: Text "The Economist" ignored (help)
  19. ^ "Greeks and the state: an uncomfortable couple". Associated Press. May 3, 2010.
  20. ^ "FT.com / Capital Markets - Strong demand for 10-year Greek bond". Retrieved 2 May 2010.
  21. ^ a b Greek Debt Rating Cut to Junk Status, The New York Times, April 27, 2010
  22. ^ "BBC News - Greek credit status downgraded to 'junk'". Retrieved 2 May 2010.
  23. ^ Greek bonds rated 'junk' by Standard & Poor's, BBC, 2010-04-28
  24. ^ "Timeline: Greece's economic crisis". Retrieved 2 May 2010. {{cite web}}: Text "Reuters" ignored (help)
  25. ^ "ECB: Long-term interest rates". Retrieved 2 May 2010.
  26. ^ http://online.wsj.com/article/SB10001424052748704133804575198390974245622.html
  27. ^ http://www.businessspectator.com.au/bs.nsf/Article/ECB-suspends-rating-limits-on-Greek-debt-549GS?opendocument&src=rss
  28. ^ http://www.reuters.com/article/idUSLDE6420A920100503
  29. ^ http://www.bloomberg.com/apps/news?pid=20601087&sid=aTTlZki30xTI&pos=3
  30. ^ "Greek parliament passes austerity bill". Retrieved 2 May 2010. {{cite web}}: Text "Reuters" ignored (help)
  31. ^ "Greek Protests Mount as Parliament Passes Budget Cuts (Update4) - BusinessWeek". Retrieved 2 May 2010.
  32. ^ Greece Seeks Activation of €45bn EU/IMF Aid Package, Irish Times
  33. ^ IMF head Strauss-Kahn says fund will 'move expeditiously' on Greek bailout request, Los Angeles Times
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