In light of the continued blow out in Greek bond yields, CDS and spreads versus German bonds, here is a chart of what it means for the EUR. Unfortunately it’s not good news as it implies that EUR/USD should be trading closer to 1.20.
The Eurostat report that Greece’s public sector deficit to GFP in 2009 was bigger than initially thought (13.6% compared to the original Greek government estimate of 12.7%) has done further damage. Moody’s ratings downgrade of Greece to A3 dealt a further blow.
This means that any attempt to reduce the deficit is now more difficult whilst the probability of a debt restructuring is growing , with rumours speculating that the haircut on Greek debt could be as much as 50%.
Ouch.
ECONOMETER 