January 10, 2011
For some analysts, the prospect of an indebted eurozone nation having to restructure its debts has become as certain as death and taxes.
With Portugal the focus of bail-out speculation and financial markets pricing in a better than evens chance of Greece defaulting in the next five years, the question being asked is where, when and how a restructuring might occur.
Eurozone bond yieldsThe fear of losses, and the uncertainty surrounding future bail-outs, is driving yields on some eurozone sovereign bonds higher. Analysts believe that, even after Greece’s €110bn rescue in May, it is likely to be the first eurozone nation to have to renegotiate repayment of its debts.
“Greece is insolvent and has to restructure,” says Nick Firoozye, analyst at Nomura. “The sooner this happens the sooner the crisis will be resolved.”
Athens could yet avoid a restructuring. George Papandreou, the prime minister, was last week reported as saying it would have no problem repaying private creditors. The International Monetary Fund, moreover, has said restructuring would not be in the interest of Greece, or “of the euro area and beyond”.
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