STORS turned against Greece’s latest bailout package yesterday, with Moody’s one of many observers to conclude that despite a new €109bn (£96bn) public bailout and €50bn write-off in private debts, Athens is still insolvent.
Greece’s debt is forecast to rise next year, despite the latest rescue, which brings the sovereign’s total official rescue funds to an eye-watering €219bn.
Moody’s downgraded Greece and its banks further into junk territory, saying that despite encouraging signs on the bailout front, the sovereign “will still face very significant implementation risks to fiscal and economic reform”.
RBS’s Jacques Cailloux summarised the outcome as “rolling crisis still likely”, saying that: “The Greek debt load will be at best reduced by 10 to 20 percentage points of GDP to what will still be seen as an unsustainably high level.”
Capital Economics’ Ben May agreed: “Greece’s debt will remain at worryingly high levels: we still expect it to be at around 150 per cent of GDP two to three years down the line.”
He said that it would have to be brought down to a maximum of 70 to 100 per cent of GDP to have any chance of convincing markets.
And Société Générale’s Michael Marcussan said that the “real test” will be Greece’s ability to deliver on its deficit-cutting programme.
Meanwhile, German chancellor Angela Merkel faces growing anger at home, where she has been accused of concocting a deal that will “collectivise” European sovereign debt risk. The German parliament will not vote on changes to the EU’s bailout fund until September.