There is irritability on international markets since the beginning of the quadrilateral talks between the Greek Government and representatives of the European Commission, European Central Bank and the International Monetary Fund, who have been in Athens since the beginning of the week. While they were discussing how to further reduce wages and pensions, the number of public employees and to reform the labor market, investors panicked and the spread-index and cds-insurance shot up in the air and collapsed the Athens Exchange and the common European currency.
Spread-index which reports the difference in interest rates between the 10-year Greek government bonds and the German ones crossed the psychological barrier of 500 points and reached 529 points. This is a new, 12-year negative record. Interest on Greek securities rose by 80 points only for 2 days from Monday to yesterday. For comparison, the Portuguese spread-index is 159 points and by April 2009 it has risen by only 4 points. The Greek spread-index is more than five times higher than the Spanish one, and Spain and Portugal are the next most financially strapped countries in the eurozone after Greece.
Not happier is the level of cds-insurance against the possible insolvency of Greece. The cost of insurance for Greek government securities reached 489 points, i.e. it increased by 25 points only in one day. This means that in order to borrow €10 million, the Greek state must pay €489 000 insurance against a declaration of insolvency. For comparison the respective values of cds-insurance in Portugal are 219 points and in Spain - 151.2 points. The negative climate did not pass the Athens Stock Exchange as well, which closed the day with a decline of 1.30 percent.
Nervous investors could not help but shake the Euro as well, which on Wednesday fell with 0.43 percent and is now equal to $1.3384. The single European currency was sold today for 124.659 Japanese yen and 0.8693 British pounds.
In this current revival of the international markets analysts are fixed on the negotiations in Athens where they are expecting to find out when, how and under what conditions European financial injection will be granted for the Greek economy. There is unofficial belief that the motion on the matter is not expected until May 9, when local elections in Germany will take place. As is well known Germany's Chancellor Angela Merkel is under pressure to allocate the bulk of financial support for Greece - a concept that clearly is not supported by German voters. Finance Minister of the largest economy in the eurozone Wolfgang Schäuble officially acknowledged today that Berlin is expecting a formal request from Athens in order to start up the mechanism for financial support. Though, he denied the amount of the aid to be €80 billion, as Greek media reported.
Sources from the International Monetary Fund also gave 20 days before clarifying the details on rescuing the Greek economy.