Greece is in debt, and its people are rioting in the streets. Fitch recently downgraded the nation’s credit rating to BBB-, which is among the lowest scores available. The European Union has promised that it will try to help Greece with debt repair, but it will take a massive amount of aid for Greece to be able to close its financial sinkholes. Sky News Online reports that while Greece will have to borrow in order to cover its 8.5 billion-euro debt – which comes to maturity on May 19 – Greece’s national debt now bares the albatross of junk status. Hence, those who hold 10-year Greek sovereign bonds are demanding more than a 10 percent interest rate of return from Greece’s government. That’s the highest ever recorded in the eurozone, according to Sky News.
Greece debt equals junk and high risk to investors
As a result of the junk rating applied to the Greece debt and the application of the debt to Greek bonds, Sky News states that “big investors such as pension funds will no longer be allowed to buy the country’s debt.” Shrinking options couldn’t come at a worse time for Greece, as its debt status places it in the same credit bracket as Colombia, Romania and Azerbaijan. Greek citizens are waging protests daily, as job seekers assemble outside the finance ministry in desperation. Economists like Koen De Leus of KBC Securities tell Sky News that if a solution for how to handle Greece’s debt isn’t in place soon, the entire European market will be dragged down. The euro is already down to a new one-year low against the dollar, while stock markets across the European Union have dropped significantly. The ripples even dropped the Dow Jones by 200 points yesterday.
Finance minister says Greece will pay debt ‘absolutely and without any doubt’
Instilling investor confidence is always important, but not everyone believes Grecian Finance Minister George Papaconstantinou’s optimism that Greece will cover debt by the May 19 deadline. Britain’s Chancellor of the Exchequer Alistair Darling said in a joint meeting of the International Monetary Fund, European Central Bank and other financial organizations that it is “absolutely essential” that the problem of the Greece debt be handled “quickly, effectively and decisively.” Payday loans will play a role, but the amount of money Greece requires necessitates significant aid from the entire European Union.