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The largest investment fund Pimco has refuted Antonis Samaras

03 January 2014 / 15:01:34  GRReporter
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The largest investment fund for bonds management in the world Pimco showed Greece a "red card", saying that it did not intend to buy Greek bonds and that the country will not avoid taking on a new loan.

Just a few days after Prime Minister Antonis Samaras said that Greece "can stand on its own two feet " and no longer needed the support of its creditors, today, Pimco directly refuted the Greek Prime Minister.

Antonis Samaras made this important statement during his New Year speech: "In 2014, Greece will return on the international financial markets and pave the way for its smooth development and there will be no need for new loans and a new memorandum."

However, international markets do not seem to have believed this statement, but think that the plan of the Greek government is not realistic. As manager and executive vice president at Pimco Miles Bradshaw stated in today's edition of the Süddeutsche Zeitung, "we do not believe that this year Greece will be able to get money from the international markets."

Pimco’s opinion is very important, since the company has invested a large part of its customers’ portfolio, amounting to 1.5 trillion euro, in government bonds.

"Interest rates on 9-year Greek bonds are currently moving around 8%," said a Pimco expert for the German newspaper. "If the country takes large loans under these conditions, then the total weight of interest rates on the debt will be much higher compared to a scenario in which Greece continues to borrow from the European Stability Mechanism ESM", he added.

In confirmation of his words, the newspaper gave an example: borrowing from the European Stability Mechanism will cost Athens around 2%. In 2013, the country paid about 5.5 billion euro in order to cover its interest liabilities. The Greek Finance Ministry has estimated that the country can afford interest expenses to the amount of between 7 and 8 billion euro. However, that amount will not be enough if it has to pay interest at a rate of 8%, if not more, in the case that it borrows from private investors.

"A tactical move"

Marcel Fratzscher, President of the German Institute for Economic Research (DIW), also believes that Greece will not be able to avoid a new memorandum, suggesting that this will happen in 2015. "Debt, and consequently the amount needed to cover the interest, is huge," said the German financier for the German news agency DPA.

"This is the reason why Athens will not be able to finance its debt on the free market. The Greek Prime Minister’s promises imply rather more political motives, or this is a tactical move aiming at increasing the pressure on creditors in order for them to agree on debt restructuring. In this way, Samaras hopes to win an extension of debt repayment and lower interest. In this case, the debt would be viable, or at least Athens hopes so. The country could try to borrow money from financial markets only in this case," said Marcel Fratzscher.

Wolfgang Bosbach, a prominent member of the ruling Christian Democratic Union, agreed that a new memorandum is inevitable. For Die Welt, he explained that his aim was not to refute the fact that the Greek government had the will to deal with the crisis.

"However, the question is whether the Greek economy has the strength and competitiveness to reduce the high debt ratio, and I am afraid that they will not succeed," said the Christian Democrat MP.

And finally, Markus Ferber, Chairman of the delegation of the German Christian-Social Union in the European Parliament, said for the same newspaper that steps taken in terms of reforms will be examined at the beginning of the year and "then we will see if we need a third package; currently, I do not want to hazard a guess."

Meanwhile, in November arrears to the state amounted to 61.4 billion euro, marking an increase of 1 billion euro compared to the previous month, according to data of the general secretariat for public revenue.

The data also revealed that since the beginning of the year, the Treasury has received revenues of arrears amounting to 2.8 billion euro.

Tags: investment fund Pimco Antonis Samaras statement memorandum
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