A resolution to the Greek debt crisis is still nowhere in sight, and investor patience is wearing thin. Reports out yesterday indicated that the Greek government had wanted changes made to the terms of a rescue plan proposed by European leaders and the International Monetary Fund on March 25. According to various news accounts, Greek officials were looking for ways to limit the role of the IMF in the rescue deal, fearing that the conditions imposed by the organization would be too harsh. The Greek government denied these claims, but investors responded swiftly, driving up yields on ten-year bonds to above 7 percent.
The future looks bleak for the Greek government’s fiscal health. This year alone it will need to raise $40 billion -- $15.5 billion of which it will need to come up with by May. Total debt now stands at 113 percent of the country’s GDP, which is well above the euro zone's limit of 60 percent, while the budget deficit has ballooned to 12.7 percent of GDP.
And though the severity of this crisis has been known for months, Europe has yet to come up with a plan that inspires the confidence of investors. The EU nations had said they were prepared to offer Greece a lifeline in the case of an emergency, but how and when that bailout would occur was unclear. Last month, the EU and IMF announced that they had come up with a joint plan to rescue Greece, but again many of the details weren’t disclosed, such as the precise nature of the IMF’s role in the bailout.
Greek officials, meanwhile, have been trying to stir up interest for its debt in other parts of the world, with little success. According to reports, the appetite among Asian investors for a new $10-billion offering has been minimal. Officials are also targeting U.S. investors and will embark on a roadshow in the coming weeks. The problem though is that many new investors in Greek debt have suffered losses in recent months and are reluctant to take on greater exposure to the crisis.