Investors expect Greece to renege on debt deals

Associated Press
April 19, 2011

Investors increasingly expect Greece will not pull itself out of its financial hole and will have to renege on some debt payments, despite spending a year on bailout loans making painful austerity reforms.

The concern that bailouts and austerity, once Europe's hailed recipe for the crisis, are insufficient and that debt jitters are particularly difficult to control once unleashed has resonated globally. Even the U.S., whose debt investors have huge faith in, was warned by a ratings agency this week about its heavy borrowings.

Despite repeated insistence from Greek and EU officials that there are no thoughts of restructuring Greece's debt, markets are predicting that will happen eventually, that the euro110 billion ($157 billion) international plan to save the country's finances is failing despite sweeping government reforms.

"It's not the fault of the markets," said economic analyst Vangelis Agapitos. "Its the fact that 18 months since the very beginning of this crisis, we still have vague plans as to how we're going to counter the beast, which is a huge government, a difficult to tame deficit and a very large debt."

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