Goldman Sachs said that Greek bondholders are unlikely to get all their money back on schedule unless borrowing costs fall, according to Bloomberg.
Andrew Wilson, head of fixed-income, said that unless there is a dramatic change in the interest-rate structure, “I think some form of restructuring is a relatively high-probability event” after 2011.
Greece’s EUR110bn bailout in May failed to stop its bond yields surging, infecting other so-called peripheral nations including Spain and Italy, says the news agency.
The crisis in the euro region’s most indebted nations “gives a lot of investors jitters,” said London-based Wilson, who joined Goldman Sachs in 1995 and was made a partner four years ago.
Bringing funding costs down “is either happening through time and the fiscal austerity — markets are not being very patient around that — or we get some direct intervention,” Wilson said. “That’s what we’re waiting for: is the European Central Bank going to come up with something?”
Regarding speculation on the Greek debt restructuring, Wilson stressed that it’s the uncertainty that’s creating the problems at the moment. “It feels a bit like a standoff here between the authorities, be it the ECB or European governments, and investors, saying, ‘well, are we willing to lend money to countries like Portugal and Spain?’”, he added.
He also that interest rate at 7% is not sustainable with peripheral nations’ budget deficits as high as they are. Still, measures including the EU rescue fund “mean countries like Greece don’t need to come to the market” to sell new bonds, Wilson told Bloomberg.
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