Financial Times
May 8, 2011
Greece has denied that it is considering leaving the eurozone but its looming cash crunch could revive fears that the bloc’s debt crisis may spread to Spain.
The admission at the weekend by George Papaconstantinou, finance minister, that Greece was seeking European Union help to finance its debt obligations in 2012 and 2013, rather than return to markets, is set to fray investors’ nerves as eurozone bond markets face a critical week.
A year after its bail-out by the EU and the IMF, Greece has made little progress towards putting its public finances in order, let alone achieving the sizeable budget surpluses needed to stabilise its public debt.
Greece’s plight could dash hopes that Portugal’s bail-out announcement last week had drawn a line in the sand in the more than year-long debt crisis.
One senior investor said: “The hope is that Portugal will be the last bail-out and there will not be contagion to Spain. But worries over Greece could spark a big sell-off in peripheral bond markets and increase the chances that Spain will need rescue loans too.”
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