MARKETS REACT POSITIVELY TO GREEK DEBT MOVE - Investors are appearing to look positively on the pledge at the European Union summit in Brussels to support the debt crisis in Greece. However the euro fell on international currency markets amid uncertainty over the details of any aid package on offer. Financial markets had hoped EU leaders would lay out specific plans to provide Greece with a credit life-line or a scheme in which state-owned European banks would buy Greek bonds in order to help the government finance its borrowing. Any detailed proposals are likely to be discussed by EU finance ministers at meetings in Brussels early next week.
Meanwhile, official figures from Germany show that Europe's biggest economy did not grow in the last three months of 2009 . The euro zone needs Germany to be in a position to help Greece and other countries.
Ciaran O'Hagan, head of rates research at Société Générale in Paris, says that Greece does not need help 'right now'. He said the debt-ridden Athens government had not asked for help and so received none. However, what it did receive was a promise that there will be cash available if markets remain as difficult as they are now. Mr O'Hagan says that ultimately Greece will not need any cash and points out that governments can raise tons of cash in many different ways. He says that Greece has several different credit facilities available to it and is not at 'death's door'.
Mr O'Hagan says that market movements at the moment are quite excessive. To put the Greek situation in perspective, he says that the Greek government will borrow about €2,300 for every citizen in the state this year. Ireland, in contrast, will be seeking fresh borrowing levels of almost €5,000 for every man, woman and child here as well as the much more difficult target of supporting the banks.
He says the difference with Greece and Ireland is that Greece has been dealing with years and years of accumulating debt, while Ireland's new found debt - which is rising fast - has not reached the Greek levels yet.
