Greece seeks no bailout, lashes out at speculators

By Paul Carrel and Krista Hughes

BERLIN/DAVOS (BestGrowthStock) – Greece has asked no country for a bailout and is the victim of speculators intent on attacking a “weak link” in the euro zone, its leader said on Thursday as the premium on its debt hit a new high.

Greek Prime Minister George Papandreou said his country was being targeted by speculators with ulterior motives opposed to the single European currency.

Germany and France denied a media report that they were planning to give financial aid to Greece, whose budget deficit hit an estimated 12.7 percent in 2009. Athens says it is seeking funds only through the markets, mainly in Europe.

Greece has pledged to reduce its budget deficit this year to 8.7 percent of GDP through welfare cuts, tax reforms and savings on public-sector wages.

Papandreou told the World Economic Forum in the Swiss ski resort of Davos that Greece would not leave the euro area and would use the discipline of membership to slash its budget deficit and make long-postponed structural economic reforms.

“This is an attack on the euro zone by certain other interests, political or financial, and often countries are being used as the weak link, if you like, of the euro zone,” Papandreou said.

Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country holds the European Union’s rotating presidency, rallied to Greece’s defense and told the same panel that those putting pressure on the euro now had opposed its creation at the outset in the 1990s.

Financial markets are gripped by the fear Athens will not be able to service its heavy debt, putting pressure on the euro and even raising speculation as to whether Greece could be forced out of the currency bloc.

The euro has fallen below $1.40 for the first time since last July, partly due to jitters over the Greek fiscal crisis, while the premium investors demanded to hold Greek debt rose to 4.05 percentage points over German bunds, the highest level since creation of the euro.

France’s Le Monde daily reported that countries, including France and Germany, were studying how to quell market nerves, but would only act if Athens did more to clean up its accounts.

Not true, Germany said.

German Finance Ministry spokeswoman Jeanette Schwamberger said in a statement: “It is incumbent upon Greece to face up to its responsibility for the stability of the euro zone by its own efforts. Therefore, the federal government is not considering financially supporting Greece in its efforts to overcome its difficult budgetary situation. This applies both to would-be euro zone aid and particularly to bilateral aid.”

A French government source took a similar line.

“FATAL EFFECTS”

Asked about Le Monde’s report, Papandreou said Greece was only looking for funds in the capital markets.

“The answer is very simple. We went (to the market) for borrowing two days ago and we were five times oversubscribed. We’re not looking for money from anywhere else, from the European Union,” he said.

He added Greece was not seeking and did not need bilateral loans, and he denied media reports that Athens had struck a deal with China to buy Greek government bonds.

There were other signs of the concern in Europe over the impact Greece’s troubles are having on economies struggling in the aftermath of the financial crisis.

International credit ratings agencies warned Portugal to come up with longer-term plans to combat its own deficit problems, saying this week’s 2010 budget did not do enough to diminish their concerns.

German Economy Minister Rainer Bruederle told parliament a number of countries using the European single currency were in such a state they might have a fatal impact on the rest of the 16-member club.

“Some euro states are showing dangerous weakness. This may have fatal effects on all states in the euro zone,” he said in a speech to the Bundestag lower house.

Fatal has more than one meaning in German and it was not immediately clear whether Bruederle was suggesting there was a threat to the euro zone itself.

The cost of insuring Greek government debt against default shot up to a record high of 400,500 euros per 10 million euros of exposure at one point on Thursday, according to five-year credit default swap prices from CMA DataVision.

Le Monde quoted “several senior officials” as saying that the euro zone “was ready to help Greece if the country assumed its responsibilities.” One government source told the paper other euro zone countries did not want to see Greece seek help from the International Monetary Fund.

“Something will have to happen very soon as the market does not want to absorb the amount of upcoming Greek fund raising, under the status quo,” said Jason Manolopoulos, portfolio manager at Dromeus Capital in Athens.

“The market is pushing for specific actions.”

Investing Analysis

(Additional reporting by Anna Willard and London Markets Team, writing by Paul Taylor, Stella Dawson, editing by Jon Boyle)

Greece seeks no bailout, lashes out at speculators