THE TELEGRAPH: Euphoria over a joint EU-IMF rescue deal for Greece worth €45bn (£39.8bn) has given way to caution after angry reactions in Germany and continued concerns among bond investors that any bail-out merely delays the day of reckoning.
Greek borrowing costs have fallen from post-EMU highs last week but still remain at stress levels. The yield spread on 10-year bonds over German Bunds dropped by 45 basis points to 6.75pc on Monday.
"This is a short-run fix, not a long-run solution," said David Owen at Jefferies Fixed Income. "At the end of the day, Greece has to carry out monumental fiscal tightening even as it slides deeper into recession. They risk chasing their tale. [sic]"
Mohamed El-Erian, head of the US bond fund Pimco, doused hopes that his firm would soon step in to buy Greek debt, saying the rescue package at rates near 5pc does not address the underlying "solvency challenges" facing the country.
The German taxpayers' union accused Chancellor Angela Merkel of caving into pressure, saying Germany would be left on the hook for huge liabilities.
Christoph Steegmans, spokesman for the finance ministry in Berlin, insisted that "nothing had changed" as a result of the weekend pledge by eurozone states for €30bn of loans. Help is "not automatic" and cannot be activated if any state objects. "The fact that the fire extinguisher has been primed says absolutely nothing about the probability of a fire," he said.
Frank Schäffler, a Free Democrat finance expert in Mrs Merkel's coalition, said the rescue deal is "clearly a subsidy" and violates the EU summit deal in March. "We're on very thin ice legally," he said, hinting at likely court challenges.
Professor Ekkehard Wenger from Würzburg University said the aid for Greece is "another step on the slippery slope downwards. All rational economic rules are being thrown out of the window. This is a bottomless pit."
"In the short-term this may calm things but within 10 years the eurozone is not going to exist any longer in its current form," he told Handelsblatt. >>> Ambrose Evans-Pritchard | Monday, April 12, 2010
