George Soros, the billionaire investor, suggested on Thursday that the Greek government would not be allowed to default on its debts despite growing budgetary difficulties and market concerns. Greece, the lowest-rated country in euro region, is struggling to cut a budget deficit of 12.7% of GDP.
“There has to be pressure on Greece to put its house in order but I’m sure that Greece will not be allowed to default,” Soros told Sky News television. [Reuters]
Investors are increasingly concerned Greece may be the first major country in the Euro Zone to default on its debts since WWII. Former Bank of England policy maker Willem Buiter who will join Citigroup (C) as its chief economist next month, said, “We could see our first EU 15 sovereign default since Germany had it in 1948.”
Buiter however, pointed out that default is not unavoidable. “But unless there are radical fiscal actions, lasting cuts in spending and tax increases of at least 7% of GDP, the writing is on the wall” for Greece, he said. [Bloomberg]
Fitch Ratings cut Greece’s debt rating to triple B-plus with a negative outlook on Tuesday prompting the 10-year Greek yield spread over Bunds to increased to more than 220 bpt, the widest level since April.
Fitch’s downgrade marked the first time in 10 years a major ratings agency has put Greece below an A grade — citing fiscal deterioration in the euro zone’s weakest member.