GREECE IS not discussing a bailout with other European Union countries, its finance minister George Papaconstantinou said yesterday, when financial markets gave his emergency deficit-cutting plan a thumbs-down.
Speaking following a meeting with his French counterpart in Paris, Mr Papaconstantinou also said his country was doing everything necessary to reduce its public deficit.
“There is no question of a bailout. There is absolutely no question of a bailout and we are not discussing that with our colleagues,” he said.
“Greece will do what is necessary to reduce its public deficit,” he said before heading to London to meet with investors and his British counterpart.
Investors sold down Greek debt and bank shares yesterday, as workers launched protests against planned austerity.
The reaction highlights the tightrope walk facing Greek prime minister George Papandreou, elected in October after promising to tax the rich and help the poor, as he tries to calm markets while catering to restive voters.
The risk premium on 10-year government bonds jumped to 257 basis points above benchmark German bonds from 231 on Monday after Mr Papandreou outlined his plan to slash the huge budget shortfall by curbing welfare spending and raising taxes.
The Athens stock exchange lost 2.12 per cent by mid-afternoon and bank shares were down nearly 3.5 per cent. Analysts said the economy needed much more potent medicine.
Asked about the reaction of markets, Mr Papaconstantinou said the markets were “watching us with close attention, waiting to see that the announcements get translated into action, and it is evident that it is quite difficult to be convincing before that happens”.
Turning to the prospect that ratings agencies other than Fitch Ratings downgrade the nation’s sovereign rating, Mr Papaconstantinou said he hoped this would not happen.
“We are speaking with all the agencies but it is a medium-term effort that we are working towards.
“It is not an effort which will translate very quickly.”
Greece plunged into crisis last week when Fitch Ratings cut the country’s sovereign credit rating to below A grade, the lowest in the euro zone, for the first time in a decade.
A team from Moody’s, which has Greece’s outlook on negative watch, was in Athens yesterday to meet government officials.
Euro zone leaders and most bank analysts say there is no prospect of Greece defaulting on its debt.
European Central Bank governing council member Nout Wellinck said the markets would force Greece and other problem countries such as Spain and Portugal to clean up their public finances. – (Reuters)
