The Greece Debt problem has a bit of breather for now at least if not for all. On April 11 the European governments offered debt-plagued Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro. The borrowing costs in Greek surged to 11-year high recently. The package includes 30 billion euros in three-year loans in 2010 at around 5 percent. Another 15 billion euros would come from the IMF.
Euro region officials have spent the past two months debating whether to maneuver around the rules of the Maastricht Treaty, which left the bloc without a common finance ministry to match its shared central bank. The treaty also contains a “no bailout clause,” making it harder for governments to agree on fiscal transfers for euro members facing fiscal crises.The 16-nation currency euro declined 5 percent this year against major currency dollar. This was mainly due to the largest ever budget deficit of the EU till date. The debt prices (bond) of Greece also declined resulting into yields shooting to 11 year high to 7.51 percent last week.
Investor confidence in Greece will be tested today when it offers a combined 1.2 billion euros of 26- and 52-week bills. So far Greece, whose deficit was 12.9 percent of gross domestic product last year, says it won’t need to trigger the package.
Experts say others of the PIGS i.e. Portugal, Italy, Spain are less serious than Greece. Although the sentimental effect could be exaggerative.
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