Soros sees "death circle" if Greek loan rates high

ATHENS, April 19 (BestGrowthStock) – Greece needs help to beat its
crisis and there is a risk it will fall into a “death circle” of
recession and falling budget revenue if its borrowing costs stay
high, financier George Soros told Greek Skai TV on Monday.

Athens hopes to begin talks with European and International
Monetary Fund officials on Wednesday on a policy programme that
investors are increasingly convinced will lead the debt-ridden
country to tap what would be the biggest bailout ever attempted.

Soros said the spike in Greek bond spreads — the premium
investors pay to buy Greek debt instead of equivalent German
bonds which hit a euro lifetime high on Monday — was caused in
part by market speculation.

But he added the main issue was Greece’s very real economic
problems and it had effectively already set a plan in motion to
tap aid comprising 30 billion euros from euro zone states and up
to 15 from the IMF in the first year.

“I think it is necessary because the market interest rate is
really far too high to make it possible for Greece to meet the
conditions that are required of it,” the billionaire told Skai’s
Folders news show, according to a transcript provided to
Reuters.

Soros said it was regrettable that Germany had insisted on
an interest rate of as much as 5 percent for the aid package
because it would water down the bailout’s impact.

There was a “real danger” that such a high rate would cause
Greece to cut its budget further, hurting economic activity and
eventually undermining budget revenues, he said.

“Then it becomes a vicious cycle,” he said. “I would call it
a death circle. That’s really the danger.”

German voters oppose helping Greece and Berlin has resisted
giving the aid a green light and says it could send the wrong
signal to countries that flout EU budget rules.

Soros said he thought the IMF would be satisfied with Greek
deficit-cutting reforms thus far, which include public wage
cuts, tax hikes and a pension freeze.

He said a restructuring of Greece’s debt would be a
desirable way out of the crisis, but that it would not be
possible because Greek banks hold so much government debt.

“If you had a default or rescheduling you may have a banking
crisis, so it seems to me that there is actually no practical
alternative to what the government is currently doing,” he said.
(Reporting by Renee Maltezou and Harry Papachristou; writing
by Michael Winfrey; editing by Tony Austin)

Soros sees "death circle" if Greek loan rates high