BRUSSELS (MNI) – A joint pledge of aid for heavily-indebted Greece
from the International Monetary Fund and the Eurozone member states
should gradually reassure the financial markets and bring down Greek
government bond spreads, a spokesman for the European Commission said on
Wednesday.
But that can’t be expected to happen quickly, the spokesman added.
European Union leaders last week agreed on a package for Greece
that would be funded both by the IMF and with bilateral loans from
Eurozone countries. The aid would only be disbursed as a “last resort,”
if Greece requested it; if the ECB and European Commission agreed; and
if it was approved unanimously by all 16 Eurozone states.
But the lack of details in the plan failed to satisfy the markets,
as Greek government bond spreads widened to more than 340 basis points
above the German Bund early Wednesday on disappointment over Tuesday’s
sale of 7-year Greece bonds. Spreads have since narrowed to just above
330 basis points, but that still makes Greece’s cost of borrowing more
expensive than before the aid deal was announced.
The Commission spokesman said he expected the deal would eventually
reassure the markets, adding that Greece is on track with its domestic
efforts and that it is focusing on medium- and long-term issues as well.
He said this work had been welcomed by the Commission, the IMF and
the European Central Bank and “should comfort the market forces as
well.”
He said the Commission didn’t expect this to happen immediately,
but viewed it as a gradual normalization process.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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