Greece Denies Wanting to Change EU, IMF Aid Deal Amid Sell-Off

Tuesday, 06 Apr 2010 12:54 PM


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Greece isn't seeking to amend an EU-IMF safety net agreement, a top finance ministry official said, trying to calm markets that ditched Greek assets and the euro after a flurry of news suggesting Athens' debt crisis was worsening.

The comment came after Market News International quoted unidentified senior Greek government sources as saying Athens wanted to renegotiate a deal struck at a European Union summit last month meant to protect Greece from potential default.

Returning to markets after a four-day Easter break, investors battered Greek assets both before and after the denial, raising doubt over whether the safety-net deal had delivered the euro zone country out of the depths of its fiscal turmoil.

Other negative news about Greece also weighed, as shares in the country's banks fell sharply and the premium investors demand to hold 10-year Greek government bonds rather than euro zone benchmark German Bunds rose to its highest level since late January.

The official, who requested anonymity, rejected the Market News International report on the safety-net rethink: "There is no request from Greece to renegotiate the agreement.

There is a deal on the support mechanism and we are sticking to it." The report had said Athens wanted to bypass a potential contribution from the International Monetary Fund because it was concerned that the IMF would impose tough conditions.

"The measures are tough and might cause social and political unrest. After that, various cabinet members voiced their opposition to the IMF contribution," MNI quoted an unidentified official as saying.

The European Union executive and European Central Bank had no comment on the report on Tuesday.

Meanwhile, the Financial Times reported on Tuesday Greece was seeking $5 billion to $10 billion from U.S. investors to help cover its May borrowing needs of about 10 billion euros ($13.5 billion) to roll over maturing debt and meet interest payments.

The head of Greece's PDMA debt agency told Reuters last week Athens would issue a global U.S. dollar denominated bond in late April or early May.

He did not say how much it would seek to raise but said a roadshow would be organized after April 20.

Investor uncertainty also grew following a report in Britain's Daily Telegraph saying wealthy Greeks and companies were looking to move their funds outside the country.

It said big depositors had been clamoring to move cash to international banks such as HSBC or France's Societe Generale, which run large branches in Greece.

The report appeared to contradict recent data from the European Central Bank and comments to Reuters by analysts and Greek banking sources, who said there was no clear evidence of a major, extended deposit outflow from Greek banks.

The 10-year Greek/German government bond yield spread widened to as much as 380 basis points, from 349 bps late on Thursday, and Greek bank stocks fell 3.1 percent.

Five-year credit default swaps (CDS) — the price of insuring Greek debt — rose to 354,000 euros to protect 10 millions of government bonds, from 347,000 on April 2, according to CDS monitor CMA DataVision.

"There was selling pressure on Greek bonds on the back of some press reports on Greece looking to amend a deal struck at an EU summit last month to bypass the IMF, with the lion's share of trades focused on 2-year and 5-year paper," said Stergios Pantostis, co-head of trading at EFG Eurobank.

Prime Minister George Papandreou had urged euro zone states last week to keep working on the idea of a euro zone borrowing agent to help debt stricken countries, days after EU leaders agreed on the aid mechanism.

Government spokesman George Petalotis had explained then that Greece was satisfied with the EU deal but was looking for improvement in the long term.

European markets were shut for Easter on Friday and Monday.

© 2014 Thomson/Reuters. All rights reserved.

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