Greek 10-year bond yields fell to a new record low on Tuesday, while the spread between the Greek bond and the Greek benchmark bonds widened, after statements by German chancellor Angela Merkel’s financial advisor Lars Feld on Bloomberg television on the prospect of a restructuring of the Greek debt spurred strong pressures on the domestic and the Portuguese bond markets.
“I don’t think that Greece will succeed in this consolidation strategy without any restructuring in the future, or perhaps also in the near future,” Feld told. “Greece should restructure sooner than later.”
While there’s consensus among most economists that Greece has to restructure, policy makers in Germany are divided and the European Central Bank isn’t ready to back such a move, Feld said. Greece’s debt will swell to 150 percent of gross domestic product, meaning the country will have to pay as much as 9 percent of its GDP in interest, he said.
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