A two-year 20% interest rate and restructuring is a matter of time…

Today’s auction for three-month treasury bills is beginning to look like a crash-test as the spreads of Greek bonds in the international market have risen to unprecedented levels, higher than those of a year ago, prior to laying our cards on the table about the 110 billion package whereby Greece had been threatening the speculators.

If the Greek state were to borrow now, not for three months but for ten years, it would have had to repay at 14,8, about 16,4% for 5 years or 19,8% for two years. If a Greek were to pay such interest rates for wanting to borrow money in order to buy an apartment in Pagrati, they would certainly shout about being robbed.

However, contradictory statements, conflicting information and the “inner desires” both of speculators who count heavily on the bankruptcy of the country, and of the government who wishes to get over this situation so as not to bear the burden of fiscal adjustment, all spread panic to investors who hear the word "Greece" and suffer a nervous breakdown.

Even after last Friday's announcements for mammoth privatizations in OPAP, PPC, OTE, and the deluge of denials from Athens, Brussels and Washington, the markets “honored” Greece with an explosion of interest rates. Debt restructuring is beginning to look like a self-fulfilling prophecy, even despite the “brakes” the manager of the Bank of Greece sought to apply yesterday on several scenarios.

Even the premiums on bonds against the risk of bankruptcy suggest bankruptcy probabilities at 64%, breaking every record in the meantime: investors who would like to take out insurance and be compensated if their Greek bonds do not get redeemed in full, would have had to pay record-high premiums (CDS 1065 units for 10-year and 1283 for 5-year bonds).
 
A return to the markets? As if…

Under these circumstances, one year after the memorandum Greece is far from returning to the markets in 2011 or 2012. The restructuring of Greece’s debt is a permanent subject for international debate and denials can barely calm the markets, when only yesterday:

    * From Washington, Dominique Strauss-Kahn ostentatiously reiterated that there won’t be any restructuring and sounded as if he had been recorded, enunciating slowly and almost dictating the reply.
    * Christine Lagarde, the French finance minister, replied that “Greece has a contract to repay the debt” and cited the Greek prime minister who had announced “additional measures” on Friday, ignoring the fact that no governmental member has officially said anything about the sale of PPC and OPAP for example.
    * Commissioner Rehn, following Wolfgang Schäuble, the German finance minister, once more dismisses the restructuring possibility but reveals that he has requested a study on the sustainability of the Greek debt and will wait until June to see if the figures are satisfactory, or if the EU and Greece will be forced to change the memorandum and the political conditions for the supply of 110 billion euros for Greece.
    * EU president Herman Van Rompuy, like Belgian finance minister Didier Reynders, excludes debt restructuring, but sends the message that Greece might not be able to reach the markets for loans in 2012.
    * SEV president Dimitris Daskalopoulos, although dismissing the public announcements by Simitis and all those who support immediate restructuring, appears to be considering the possibility of such an occurrence in the future surrounded by a European framework…

Considering these facts then, it seems that once again – as pointed out by BoG director Giorgos Provopoulos – the developmental and financial benefits from the implementation of the memorandum are being cancelled, at least as long as the government won’t dare support the purpose and usefulness of its measures included in the adjustment program adopted in consultation with the Troika.