The European Union may have pledged aid to debt-stricken Greece, but the world's largest bond fund isn't going to buy Greek bonds any time soon.
European Union finance ministers and the International Monetary Fund have offered Greece $61.1 billion in loans as the country struggles to narrow is fiscal deficit to 3 percent of gross domestic product — the ceiling ordered by EU countries — from a current deficit of around 11 percent.
However, Pimco, the world's largest bond fund, says it will wait to buy Greek debt until the country gets its finances in order.
“It’s probably a little bit too early for us to be buying Greek debt yet,” Michael Gomez, Pimco’s co-head of emerging markets, tells Bloomberg.
“They have received a little bit of breathing room from the announcement we saw over the weekend. But this doesn’t change the fundamental adjustment Greece is facing and that continues to be a very large and daunting one.”
Investors snapped up Greece's short-term bonds on news of the aid, although analysts warn that the threat of a Greek default is still very real.
“Even under relatively conservative assumptions the Greek debt situation is unsustainable,” says Erik F. Nielsen, the chief European economist at Goldman Sachs in London and a former International Monetary Fund official, according to the New York Times.
“Something has to give.”
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