Greece Defaulting on Debts Anticipated by 85% in Global Poll of Investors

Bloomberg
May 13, 2011

International investors view a sovereign default by a euro-area nation as more likely than not with more than four-fifths betting Greece will eventually fail to pay off its debt.

Eighty-five percent of those surveyed this week said Greece probably will default, with majorities predicting the same fate for Portugal and Ireland, which followed Greece in seeking European Union-led bailouts, a new Bloomberg Global Poll shows. The outlook for all three countries deteriorated since January.

“All these countries will go bust at some stage,” said Wilhelm Schroeder, a poll participant who helps manage the equivalent of about $172 million for Schroeder Equities GmbH in Munich. “I just can’t see a scenario in which these countries get out of their debt problems.”

The pessimism underscores how investors remain unconvinced that European policy makers can prevent the euro-area’s first default even as they look to beef up Greece’s 110 billion-euro rescue package ($156 billion). The cost of insuring against a Greek default reached a record this week as investors increased bets the country won’t be able to make good on its borrowing.

Credit default swaps on Greek debt reached an all-time high 1,371 basis points on May 9, the same day the country’s two-year bond yield closed at a record 25.6 percent.

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