While there are no “4 more years” chants in Greece, we all hope that George Papandreou gets a thumbs up tonight within the Greek government to continue on with the budget cuts that must be followed in order for the country to avoid an outright default by receiving the next round of money from the EU and IMF. As the Irish can specifically speak to, the populace will pay for the recklessness of the bondholders. Assuming the PM wins, the parliament will then vote next Tuesday on the budget. The market is saying Papandreou will be victorious as 5 yr CDS is down 400 bps, back below 2000 and yields are lower. Greece did sell 3 and 6 mo paper successfully but it’s mostly just their banks that are rolling over maturing debt. The economic confidence of the Germans has changed for the worse due to everything that is going on, including the possibility of slowdown in Asia as the June ZEW fell to -9.0 from +3.1 and was 6 pts below expectations and lowest since Jan ’09. Current Conditions held in though, falling just 4 pts from last month’s record high.
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