Easing terms on emergency aid to Greece led to a decline in the risk premium of EU markets…
As expected, European finance ministers eased the terms on emergency aid for Greece, cut the rates on bailout loans, suspended interest payments for about ten years, gave Greece more time to repay and set a Greek bond buyback.
In addition, the country’s next payment of 34.4 billion-euro ($44.7 billion) was approved.
Financial markets were cheered after confirmation of the bailout funds payment, proved by the yield decrease of the country’s 10-year government bonds by 34 Basis points in the past week and by the decline in the European risk premium (VIX index).
What about long-term implications?
Following Greece’s payment confirmation, European financial ministers declared that after three years they have finally found a solution to the debt-stricken country.
On the other hand, the credit rating company Moody’s declared that Greek’s debt remained at an unsustainable level even after the payment confirmation.
More about Europe:
Further evidence for the depth of the crisis in the Eurozone was received on Friday by Moody’s downgrade of the perfect European rescue funds rating (ESM and EFSF) to Aa1 with a ‘negative’ forecast.
This came only a week after Moody’s lowered France’s rating to Aa1.
Economic data published last week regarding Europe were mixed.
There was a slight improvement in expectation surveys, though it still indicates the pessimism of consumers and the business sector.
Eurozone’s unemployment rate rose in October for the 17th consecutive month to a record level of 11.7%, while retail sales in Germany fell sharper than expected in October to a level representing an annual decline of 0.8%.