Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

WRAPUP 1-Policymakers ease markets' Greece worries

Published 12/10/2009, 07:24 AM
Updated 12/10/2009, 07:27 AM

* Juncker says Greece won't go bust, no need for EU help

* ECB's Nowotny sees no risk of euro breakup over Greece

* Greek bond spread narrows after Soros sees no default

By Boris Groendahl and Sarah Marsh

VIENNA/BONN, Germany, Dec 10 (Reuters) - Greece will not need financial help from peers in Europe and there is no danger of its budget woes leading to a break-up of the euro zone, European policymakers said on Thursday.

Greece has vowed to do whatever it takes to check its vast deficit, responding to a beating on markets unnerved by Fitch Ratings cutting Greek debt to BBB+ with a negative outlook, citing fiscal deterioration in the euro zone's weakest member.

Despite Tuesday's downgrade, the first time in 10 years a major ratings agency put Greece below an A grade, the chairman of the Eurogroup of euro zone finance ministers said Greece would not go bankrupt and so would not need help from EU states.

"I completely exclude a state bankruptcy of Greece," Jean-Claude Juncker told reporters on the sidelines of a meeting of the conservative European People's Party (EPP) in Bonn.

Markets' nerves were further tested on Wednesday when another ratings agency, Standard & Poor's, revised its credit outlook on Spain to negative and said it risked a downgrade if the government does not take tough action.

In Vienna, European Central Bank Governing Council member Ewald Nowotny dismissed any prospect of a euro zone break-up.

Asked whether there was risk of the single European currency area breaking up because of Greece, Nowotny said: "No, I do not see this in any way."

"An exit or something similar from the euro zone would be totally unrealistic for Greece, and also not doable," he added during a panel discussion in Vienna.

He added that joining the euro was not a panacea for new countries, and it was not the ECB's responsibility to step in and rescue troubled members.

Greece has faced harsh criticism over its credibility and increasing borrowing costs since a new Socialist government revealed the budget deficit was twice as big as previously forecast and would reach 12.7 percent of GDP this year.

SOROS SOOTHES

The premium investors demand to hold Greek government bonds rather than euro zone benchmark German Bunds fell after the comments from Nowotny and another ECB official, and from billionaire financier George Soros.

Soros said he was sure the Greek government would not be allowed to default on its debts despite growing budgetary difficulties and market concerns.

"There has to be pressure on Greece to put its house in order but I'm sure that Greece will not be allowed to default. The same applies to the United Kingdom," Soros told Sky News television.

In Luxembourg, ECB Governing Council member Yves Mersch said he felt confident the Greek authorities were aware of the gravity of the situation, and that they would put in place necessary measures.

The situation in Greece "shows the importance for countries that are in a monetary union to have the necessary discipline to respect established budgetary rules", Mersch said.

Greek Finance Minister George Papaconstantinou on Wednesday reaffirmed his pledge to cut the budget gap from an expected 12.7 percent of GDP this year to 9.1 percent in 2010.

(Additional reporting by Matthias Inverardi and Antonia van de Velde in Luxembourg and Mike Dolan in London; Writing by Paul Carrel; Editing by Victoria Main)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.