Tags: Ross | Greece | Rewarded | Bad

Wilbur Ross: Greece Being Rewarded for Bad Behavior

Friday, 17 Feb 2012 08:16 AM

The EU and private lenders are rewarding Greece for its bad behavior by granting it more concessions amid bailout negotiations, as Athens is failing to live up to its commitments to its debtors, says noted investor Wilbur Ross.

The Greek parliament recently approved austerity measures needed to tap $172 billion in bailout money arranged by the European Commission, the European Central Bank and the International Monetary Fund.

However, not everyone in Greek Prime Minister Lucas Papademos's coalition may be on board with actually turning commitments to austerity into reality, which has delayed disbursement of aid.
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Furthermore, Greece has punted signing off on a restructuring deal with its private debtors, also a requirement for tapping the bailout facility.

Still, the country remains in the eurozone and money is still on the way.

"Greece is being rewarded for failing to live up to its commitments," Ross tells CNBC.

"Every time they fail to live up to their commitments they get more concessions out of the E.U. or out of the private-sector lenders and I think that's a message that won't be lost on Spain, Portugal, Italy, whoever comes next."

The European Central Bank (ECB), meanwhile, deserves praise for injecting liquidity into its banking system, Ross says.

While the ECB refuses to directly intervene in the style of the U.S. Federal Reserve and buy assets from banks with freshly printed money, it has made loans more easily available to banks, which has eased a credit crunch there.

"The ECB is finally starting to act a little more like the Federal Reserve," Ross says.

"Now you really do have a lender of last resort, whereas a year ago it wasn't at all clear that you did."

The ECB is set to make a second set of cheap loans available to banks later this month, a move analysts says leaves financial institutions with enough money to not only strengthen their own financials but also, invest in corporate debt afterwards.

"They may want to plough back into European banks, but they may want to look at smaller, higher yield credit, which will be the beneficiary," says Bill O'Neill, chief investment officer of Merrill Lynch Asset Management, according to Reuters.

"Liquidity could flow into the non-financial sector, or more higher yielding financial credit sector."

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2012-16-17
Friday, 17 Feb 2012 08:16 AM
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