The international credit rating agency Standard & Poor's announced it could lower the credit rating of Portugal and Greece over the next two months, depending on the outcome of the summit of European leaders in late March 2011. The rating of Portugal remains A- and of Greece BB + . The countries would be under CreditWatch monitoring with negative expectations. S & P said it might lower the ratings on both countries until May this year, after analyzing the participation of the new mechanism for stability in solving the external debt crisis of the countries in difficult situation.
Political leaders from the European Union will meet on March 24 and 25 to establish the main features of the European mechanism for stability. If the Agency considers that the finalized plan is not satisfactory to solve the debt problems of Greece and Ireland or their obligations to creditors need to be haircut, then further lowering would be inevitable. It would not be more than two points, but the credit status of Greece would be at the lowest junk investment level, experts explain.
Meanwhile, the interest rate on ten-year government bonds compared with German ones increased to critical levels and exceeded 12%, the spread yield reaching 902 points. The spread yield varied in the range of 890 and 895 basis points since the beginning of the week, but after the announcement of S & P it crossed the psychological barrier of 900 points. Another problem that exacerbated the investors concerns and helped the interest rates on Greek government bonds rise is the growing problem in Libya. It favours German government bonds which are preferred as low-risk investment despite the limited gains.
And while international investors and rating agencies continue to be suspicious about Greece and its ability to cope with the problems of external debt alone, the Finance Minister George Papakonstantinou sought the support of the political opposition. New Democracy leader Antonis Samaras refused to negotiate with the government the mid-term action plan and the policies related to the Memorandum of financial support. The same position took the representatives of the radical left SYRIZA and the Greek Communist Party which did not respond to the Prime Minister George Papandreou’s call for public cooperation in the transitional period.
Thus the finance minister had not a wide choice to present to the audience the package of measures until 2015. The only ones interested in what the government can offer today to recover the Greek economy over the next five years were the Democratic Left Party disaffiliated with SYRIZA and Dora Bakoyannis’ newly formed Democratic Alliance.
After the meeting with the number one financier of Greece the representative of the Democratic Left Dimitris Hadzhisokratis stated that his party disagrees with the policies of PASOK. He urged Europe to support Greece in its rapid recovery by rescheduling the repayment of the bilateral financial assistance of 110 billion euros, reducing the interest rates on it and the European Central Bank to begin issuing euro bonds.
The left party representative Dimitris Hadzhisokratis stressed that the government should find a fairer way to allocate the burden of fiscal consolidation on various social groups and strengthen policies for social solidarity.
Similar were the requests of the right-wing representatives of Democratic Alliance who did not totally disagree with the announced government policy, but called for more rapid and more effective structural reforms. The independent MEP and supporter of Dora Bakoyannis Todoros Skilakakis said that Greece should cut the interest rates on the financial aid and should focus on rapid reforms without serving corporate interests and resorting to radical populism.
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