Greece May Need to Extend Loans Six Years to Avoid Default, JPMorgan Says
By Anchalee Worrachate - Sep 9, 2010 6:05 PM GMT+0200 Thu Sep 09 16:05:05 GMT 2010
Greece may need to extend a 110- billion-euro ($140 billion) bailout from the European Union and the International Monetary Fund by an extra three to six years to avoid a default on its
debt, JPMorgan Chase & Co said.
“I don’t think they have a choice, really, given their deficit is so large,” said
Pavan Wadhwa, head of European interest-rate strategy at JPMorgan in London. “Either other countries roll over the loans, effectively forgiving debt, or Greece restructures its debt and the market starts to freeze up again. They will need more help after the package expires if they were to avoid an outright default.”
The IMF-EU plan, unveiled in May, is planned to end in 2012. Investors have dumped Greek bonds after the government last year announced a budget shortfall of 13.6 percent of gross domestic product, the second-highest level in the EU. Greece plans to cut its deficit to 8.1 percent of gross domestic product this year and 7.6 percent in 2011.
Greek 10-year bonds rose for the first day in five today, pushing the yield down 15 basis points to 11.81 percent at 4 p.m. in London.
The nation won’t restructure its debt and will stick to austerity measures it pledged as part of bailout,
Petros Christodoulou, head of the nation’s debt management agency, said earlier today in London.
“No one is even contemplating or thinking about” debt restructuring, Christodoulou told
Andrea Catherwood on Bloomberg Television’s “The Pulse” program today. “The general public is very supportive of our measures.”
(Bloomberg)