Tuesday, September 20, 2011

Greece Has 98% Chance of Default on Euro-Region Sovereign Woes

Greece has a 98 percent chance of defaulting on its debt in the next five years as Prime Minister George Papandreou fails to reassure investors his country can survive the euro-region crisis.

“Everyone’s pricing in a pretty near-term default and I think it’ll be a hard event,” said Peter Tchir, founder of hedge fund TF Market Advisors in New York. “Clearly this austerity plan is not working.”

It costs a record $5.8 million upfront and $100,000 annually to insure $10 million of Greece’s debt for five years using credit-default swaps, up from $5.5 million in advance on Sept. 9, according to CMA. Greek bonds plunged, sending the 10- year yield to 25 percent for the first time.

German Chancellor Angela Merkel said she won’t let Greece go into “uncontrolled insolvency” as politicians try to limit contagion to other euro members. Papandreou’s pledge to adhere to deficit targets that are conditions of the European Union and International Monetary Fund’s bailout were undermined by data showing his country’s budget gap widened 22 percent in the first eight months of the year. more