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Nervous index of the Athens Stock Exchange

09 August 2011 / 17:08:49  GRReporter
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The index of the Athens Stock Exchange managed to regain its strategic high value of 1000 points after it had dropped to the paltry 979.25 points at noon. After yesterday's Black Monday, the stock market shares fell another 1.9% but the trading went well in the afternoon, the index recovered and grew by 0.19% and closed the day at 1000.13 points. The Greek spread-index of 10-year government bonds has remained dramatically high – 1313.8 basis points, which in fact isolates the country from the international capital markets.

In such an uncertain internal environment and hazardous situation on the world markets, the Greek Public Debt Management Agency held today an auction for 6-month bills and managed to take a € 812.5 million short-term loan the interest rate being 4.85%. This value is slightly lower compared with the previous auction held on June 12 when the interest rate was 4.9%. Foreign investors bought only 25% of the offered bills and local investors acquired the other 75%. In June, foreign investors had bought an even smaller share of the bills – 22%.

The today's auction of bills was extraordinary and driven by Greece’s urgent need of cash despite the payment of the fifth tranche of the aid from the European Union, the European Central Bank and the International Monetary Fund. As GRReporter already announced, Greece is unable to comply with the budget deficit set in the financial stabilization program and is constantly exceeding it. This raises the need for additional funding. Actually, the Greek Public Debt Management Agency had announced that there would be no auctions in August and December. The maturity of the 3-month bills issued in May worth € 2 billion is in August and of the 5-year bonds worth € 5.9 billion is on August 20.

In an interview with radio Europe 1, the President of the European Central Bank Jean-Claude Trichet urged European leaders to take urgent measures to reduce the deficit of the states they govern. Asked whether the European Central Bank would buy bonds directly from the countries with debt problems Trichet said, "We could not do that. We are a secondary market and we will stay there." In an article for the German edition of Financial Times, the Nobel laureate Nouriel Roubini urged the European Central Bank to make the interest rate on the continent zero in an attempt to revive its markets.

The Greek Finance Minister Evangelos Venizelos required the immediate activation of the permanent mechanism for financial assistance during a video conference on the Greek foreign debt, which involved the President of Eurogroup Jean-Claude Juncker, the European Commissioner for Monetary Affairs Olli Rehn, the Executive Director of the International Financial Institute Charles Dallara, the head of the mechanism for financial assistance Klaus Regling and the President of the Commission for financial and fiscal policy Vittorio Grill. The financial experts discussed the abbreviation PSI that has become so fashionable in Greece lately. Three letters that awe bankers, politicians and journalists actually stand for Private Sector Involvement - i.e. what part of the Greek debt private creditors will have to take.

According to observers, the decisions of the European Council of 21 July for inclusion of private creditors are too ambitious and unlikely to meet the expectations. The ratings agencies, in turn, threatened to treat Greece as a country in a partial default the time the private creditors begin 'voluntarily' to defer the payments on the bonds they hold at a lower interest rate. The Minister of Finance Evangelos Venizelos insisted the process to begin in September at the latest

Tags: Athens Stock ExchangesEconomic crisisGreek foreign debtShort-term billsBudget deficit
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