(Bloomberg) — Greek stocks and government bonds tumbled on mounting concern the nation may struggle to meet its debt commitments as public finances deteriorate.
The benchmark Athens Stock Exchange General Index dropped as much as 6.1 percent, its biggest intraday decline since Nov. 26. The yield on the government two-year note rose the most since 1998. Fitch Ratings cut Greece one step to BBB+ today, the third-lowest investment grade. Standard & Poor's yesterday put Greece's A- rating on watch for a possible downgrade, signaling it may be reduced within two months.
"Greek bonds were already tanking on the S&P negative outlook and Fitch gave their fall a boost," said David Schnautz, a fixed-income strategist at Commerzbank AG in Frankfurt. "It's a long-term sustainability problem. Now the government has to tell the Greek public that something needs to be fixed."
Greece, the lowest-rated country in the euro region, is struggling to shore up its finances amid a year-long recession. Gross domestic product shrank 1.7 percent in the third quarter from a year earlier, the National Statistics Office said Dec. 4.
The socialist government of Prime Minister George Papandreou, elected in October, plans to cut the budget deficit to 9.1 percent of gross domestic product next year, from 12.7 percent this year. The measures, including a partial freeze on public-sector pay, "are unlikely by themselves to alter Greece's medium-term fiscal dynamics," given the prospects of high deficits, debt and sluggish economic growth, S&P said yesterday.
The Global Financial Crises reported the UK over-estimate as follows:
Britain's newly-created independent Office for Budget Responsibility has revealed the previous government had over-estimated the UK's economic growth forecasts.
The British economy is set to grow 2.6 per cent in 2011, not the 3.25 per cent predicted by the previous chancellor, Alistair Darling, in March. The new government says it is damning evidence that the financial mess left behind by Labour is even bigger than thought. The new growth forecasts suggest higher unemployment and a harder time for Britons ahead. It prepares the ground for harsh austerity measures expected to be announced during next week's emergency budget.
Things look to be going from bad to worse in eurozone as the news stream continues to flow with less than encouraging news on all fronts. It looks to us as though the Greeks will be battered into submission and either take the austerity medicine or leave the euro and go back to having their own currency. Either way the wolves will keep the pressure on them.
Have a good one.
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