High Borrowing Costs Not Sustainable
Greece has finally done the inevitable and asked that the loan mechanism be activated. The move has been widely expected despite repeated statements from Greek officials that Greece would not request outside aid. The request for help from the EU and the IMF follows a rise in borrowing costs for the debt stricken nation. Greek Prime Minister George Papandreou said borrowing costs for Greece are at unsustainable levels and partially blamed speculators. Papandreou told listeners on a live broadcast from the island of Kastellorizo , “It is a national and imperative need to officially ask our partners in the EU for the activation of the support mechanism we jointly created . The time that was not granted to us by the markets will be given to us by the support of the euro zone.” Markets have been skeptical about Greek debt and bond spreads are at record levels. Papandreou stated, “There was no response from the markets, either because they didn’t believe in the political will of the EU or because they decided to go on with speculation. The situation threatens to demolish not only the sacrifices of the people but also the regular course of the economy. All the efforts by the Greek people are in danger of being in vain.”
Moody’s Downgrade
Greece now has a national debt of about 300 billion euros. The aid request came one day after Moody’s Investor Service downgraded Greece’s rating from A2 to A3 and Moody’s is considering further cuts. The request now needs approval from all 15 euro zone nations including Germany where opposition to the aid package is widespread. Curtis Arledge of Blackrock, the world’s biggest money manager stated, “We want to see the EU countries really get behind it and see that they’ve gelled around the idea of providing this support at the government level, at the senior policy maker level. If you see the backlash, they need to get their people on board.”
Loan Package Will Be Activated Quickly
The emergency loan package will be activated as quickly as possible said EU and IMF officials. European Commission spokesman Amadeu Altafaj stated, “Everything is going to be done in such a way that the mechanism can be triggered as soon as (necessary) and as is necessary for Greece.”He also said the interest rate on the loans would be calculated according to the formula agreed on by EU finance ministers earlier in the month. The euro posted a modest 0.1% gain but the rally lost momentum later in the day.
Quick Forex Tip: 4x currency trading offer investors unique opportunities. Online accounts can be opened quickly and easily online. Although forex markets can be volatile, savvy investors can make significant profits trading currencies. With over $3.98 trillion dollars traded daily, there is a huge opportunity for any 4x currency trader to make a profit if s/he does the proper research and keeps up with economic and political changes.
