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Fitch: the Greek debt remains unsustainable

26 September 2012 / 20:09:18  GRReporter
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The Greek debt remains unsustainable, Fitch Ratings is firm. Financial analysts predict that it will reach 180% of GDP by 2014, despite the restructuring (PSI +) implemented earlier this year. The recession will continue until 2015. This year, it will reach 7% and in 2013, it will fall to 3% in the best case scenario.

The budget deficit and the further contraction of nominal GDP will increase the debt to GDP ratio in 2013-2014, the agency stresses. It notes that the rescue programme for the Greek economy under the Memorandum of financial assistance is beyond the planned frameworks and the government should immediately respond. The package of fiscal adjustment measures amounting to 11.6 billion euro is to be immediately taken in order to decide later how to put the problem of growing debt under control.

Fitch assesses that the summit of European leaders on 8 October will not decide on the payment of the next tranche and it will be further delayed. This will put the government in a difficult situation and the only way for Greece will be to continue to sell costly and short-term government bonds to finance its current budget deficits.

The International Monetary Fund estimates too that Greece will soon be unable to service its debt. The head of the organization, Christine Lagarde, insists that part of Greece's debt to institutional lenders (the countries of Europe and the European Central Bank) should be written off in order to fit in the programme. Berlin, on the other hand, refuses to discuss such a scenario, which is straining the relations between the International Monetary Fund and the European Union. Greek government officials affirm, "The problem is not between the International Monetary Fund and Athens but between the Fund and the European Union."

The deviations from the recovery programme are significant and Greece wants two more years to be able to zero its deficit. According to Minister of Finance Yiannis Stournaras, the country needs another 15 billion euro for the extension of the programme by another two years. He insisted that Europe would not finance additional aid and that Greece would be able to obtain it alone through short-term funding in 2015-2016.

Meanwhile, the head of the Debt Management Agency Petros Christodoulou told CNBC that Greece would trigger the privatization process by the middle of November. Promises of this kind have been given repeatedly in the past two years but now, it is impossible for the country to delay the privatization. He assesses that the country will not be able to return to positive economic growth before 2014 and it will not get away without an extension in the implementation of the recovery programme.

On the day of the strike, the main indicator of the Athens Stock Exchange suffered serious fluctuations, declining in the greater part of the day. However, it ended the day with a positive result of 0.38%. The main index reached 755.09 basis points, while the turnover was 44.68 million euro. Winners on Thursday were the companies in the tourism sector (+4.2%) and the food industry (+2.2%). The national lottery OPAP grew by (+4.9%), Eurobank EFG (+3.6%) and Vlachos holding (+2.5%). Losses were registered by the companies in the sectors of telecommunications (-5.1%) and health services (-4%).

Tags: EconomyCompaniesFitchForeign debtCrisis
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