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Barclays gives over 50 percent chance that Greece will reschedule its debt

24 October 2010 / 14:10:39  GRReporter
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The chief economist of Britain's largest bank and one of the largest in the world Barclays Michael Dick believes that the likelihood of a surprising and unexpected cessation of payments on Greek Foreign debt is low. Meanwhile in an interview for the Greek economic weekly Isotimia he stated that he gives more than 50 percent chance of a more finely renegotiation of the payment conditions of the Greek debt in the form of swap agreement according to which the obligations of the Greek State to its creditors will have slightly lower values than the present ones. "In the event that Greece does not take on rescheduling its debt, the global markets will begin to increase their pressure and the possibility for bankruptcy will be closer, stresses the economist.
    In similar way, assess the condition of Greece, many financial institutions. According to Citigroup the inability of the Greek government to collect the taxes and the increase of the interest rates on the credits do not leave any opportunity for optimism. Even with very strict savings in 2013 the interests on the debt will reach 8 per cent and the need for crediting of the Greek economy will be huge. Another British institution the Royal Bank of Scotland evaluated as extremely difficult and unrealistic the entering of Greece on the international markets in 2012, as provided in the Memorandum with the International Monetary Fund. This year, Greece should buy from the international markets another 13.1 billion euros in addition to the 10 billion it will receive under Memorandum. According to RBS this is an extremely optimistic scenario.
    Rescheduling of the payments of the Greek foreign debt is inevitable and, according to the Nobel laureate Nouriel Roubini, who last year called Greece Europe’s Lehman Brothers. In an interview with Kathimerini he explains that the measures taken to limit public spending, the tax increases and the sharp decrease of loans led to contraction of the economy and a decrease of the gross domestic product. "In Greece, we are currently witnessing a deterioration of the ratio of budget deficit, public debt and GDP. Even if the country takes all the painful reforms provided for in the memorandum, in 2013 its debt will be 148 per cent of its gross domestic product. The Greek economy can not withstand such debt without asking for a rescheduling of payments on it," said Nouriel Roubini, whom Time magazine ranks among the 100 most influential people on the planet. "If you don’t want to call it a bankruptcy, do not call it bankruptcy. But it is inevitable and it will happen," concludes the economist.
    For the risk of calming down among the Greek society alerts also the manager of the Bank of Greece George Provopoulos according to whom the local economy could not withstand a new tax increase. To improve the performance in the revenue side of the budget he recommended that the Greek government should be more consistent in the fight against tax evasion and should reduce the non taxable minimum. In his report on the state of the financial system of Greece Provopoulos warns that two thirds of rehabilitation procedures must be related to cost cutting in the public sector and only one third to the taxes (the winding up of their evasion and the reduction of the non-taxable minimum). He recommends the government to take bolder steps towards consolidation and privatization of unprofitable state enterprises. According to the manager of the Central Bank of Greece if these advices are put into practice in 10 years the Greek state will earn between 3 to 5 billion euros or 1.2 to 2.2 percent of the gross domestic product.
    Amid the dark overall picture of the Greek economy and public finances, the only positive news came from the banking sector. Last week, Eurobank EFG managed to sell securities worth 500 million euros, while the National Bank of Greece is ready to follow the example and to collect 1 billion euro. According to the analysts this will happen no later than March 2011. At an attempt to seek credit outside is also aiming Alpha Bank without giving for the moment any indication about how much they will try to collect. While CEO of National Bank of Greece Apostolos Tamvakakis stresses that his institution at this stage is not interested in a merger, but in borrowing from foreign banks, the rumors about upcoming mergers continue to spread throughout the Greek media.
    To increase its capital the controlled by Spiros Latsis Eurobank EFG will most likely sell its subsidiary in Poland. This idea the economists of bank have been developing for a year, but Latsis himself strongly opposed it. Why a year later he changed his opinion is a question to which the analysts are still searching for an answers. His possible partners from Alpha Bank, however, have no plans to increase their capital as they have done this exactly one year ago.

Tags: Greek debt rescheduling Nouriel Roubini George Provopoulos Barclays Economy
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