Galery

1

A new and more extensive restructuring of the Greek debt over the next two years forecasts the credit rating agency Standard & Poor's and considered it to be "almost certain" that Greece's rating will be downgraded again. "The perspective which the evaluation shows is negative and we are almost certain that the rating will drop further after the real debt restructuring is now at the negotiations table," said the head of department for evaluations of the countries in S & P David Beers.

The assessment of the economic expert comes days after Greece's credit rating was lowered to the lowest level in the world.

"We have expressed before the view that a long-term reduction will not put an end to this story. It is completely possible to have a major rescheduling of debt later on," said Beers. In his opinion the time, when the rescheduling in question will happen depends on the Greek politicians. "Nevertheless, it would be no surprise a possible considering of the rescheduling over the next one - two years."

At the same time a technical team of the economic troika arrived in Athens. The experts are already inspecting the progress in collecting taxes, in cost control and the progress in the privatization. The management of the Troika believes that the inspection is absolutely necessary for the important decisions which the International Monetary Fund has to take in regards to the signing of the second memorandum of economic assistance and about its participation in the program for support of the Greek economy. Although the Greek government seems certain about the continuation of granting of economic aid the International Monetary Fund once again put conditions and required a faster implementation of the planned medium-term measures in order to approve the new aid package.

In letters to his colleagues in the council of ministers the Finance Minister Evangelos Venizelos determined the objectives of the medium term plan, which each of them has to implement separately. According to unnamed government sources "now begins the hard part." The management of the economic troika is expected to arrive in Athens in mid-August and the results of the assessment  will be decisive for the granting of the sixth installment in September. From a total amount of eight billion euros 5.8 billion are provided by the European Union and 2.2 billion from the International Monetary Fund.

Tomorrow in the Greek capital will begin the meeting of the International Bankers Association. There will be discussed the conditions under which the bonds maturing in the next few years will be replaced with new ones, with a longer-term, lower interest rates and possibly a reduction of the face value of old bonds. In any case, this reduction is not expected to exceed 20 percent.

In the process of preparation for the meeting and as an implementation of the decisions of the European summit last week, the Greek finance ministry appointed the banks BNP - Paribs, Deutsche bank and HSBC for contractors in the implementation of the PSI, ie the voluntary exchange of bonds, the contract for reinvestment in Greek Securities and the program for the buy-out of the debt). For an international legal consultant was appointed the law firm Gottlieb Steen & Hamilton LLP, and for an economic adviser to the country in regards to the use of PSI - the consulting firm Lazard.

Against this background, according to Germany's Finance Minister Wolfgang Schäuble, International Monetary Fund and European Central Bank believe that Greece will be able to produce primary budget surpluses in 2012. This estimate is considered to be very optimistic, since until now the expectations were that Greece will be able to reduce its public deficit to 3.5 percent of gross domestic product, and that this will happen in 2013. In order to fulfill the scenario provided by the International financial insitutions Greece will have to implement all the heavy measures of the medium term plan for a very short period of time and at the cost of mass public protests.

In a letter quoted by Reuters, but without indicating quotations, the German finance minister stated that his government is against granting the "blank check" of the European Financial Stability Fund in connection with the purchase of bonds on the secondary market. According to him a next summit will not be sufficient to solve the problem of the foreign debts in the Eurozone.

In an interview with the German magazine Stern, the German finance minister calls for imposing strict penalties on the countries that need economic assistance. "The European integration must continue, and the problem countries that receive aid must give way in turn part of their sovereignty to the European Union." According to him, "that choice is always better than for the countries with high foreign debt to be driven away from the Eurozone." Moreover, Wolfgang Schäuble urged the European Central Bank to cease its criticism of the European politicians. "We respect the independence of the European Central Bank and we do not criticize it. Ideally, this should apply, respectively," he said.

The Cypriot government bonds also expected a decrease of the credit rating today. The credit rating agency Moody's cut them by two points and from category A2 they passed into Baa1. Among the reasons for the lower rating, the financial experts pointed out the lack of political agreement, the economic situation of the country and the fact that some Cypriot banks are exposed to the Greek market.

In addition, the agency left open the possibility to further reduce the credit rating of the country, as the long-term rating was lowered from P-1 to P-2.