GREEK PRIME minister George Papandreou attacked speculators who were selling Greece’s government debt, blaming those with “ulterior motives” for exacerbating the country’s mounting debt crisis.
Sharing a stage with European Central Bank (ECB) president Jean-Claude Trichet at the Davos economic summit, Mr Papandreou said that there had been a lot of “speculation” during the financial crisis and that people who opposed the euro had targeted countries such as Greece. Countries like Greece are “being used as the weak link, if you like, of the euro zone”.
Denying reports on Wednesday that Greece had sought to borrow up to €25 billion from China, the Greek prime minister denied that his country would have to be bailed out by the EU or that Greece had sought loans from the euro zone or other EU countries. “We haven’t asked for any and don’t need any,” he told reporters at Davos.
He insisted that there was still high demand for Greek government bonds. Greece had proven its ability to raise borrowings by selling an €8 billion bond on Monday which was five times oversubscribed. This was “a vote of confidence”, he said, though he acknowledged that Greece had to pay a high cost, at a rate of more than 6 per cent.
Mounting concerns drove up the yield, or borrowing cost, on Greek bonds, breaking 7 per cent at one point on 10-year debt as the spread over German debt broke a new record. The spread over equivalent German debt reached a high of more than 3.9 per cent, pushing out other sovereign debt, with the spread on Irish debt up to 1.65 per cent from 1.55 per cent.
Mr Papandreou blamed internal problems within Greece for the country’s debt woes, saying that the previous government was primarily responsible for mismanagement, patronage and corruption, which had contributed to the collapse of the economy.
“I would first of all put the blame on us,” he said. “We did not take the structural changes to make Greece more competitive.” He said that Greeks “see it as our problem to put our house in order”.
He floated the idea of issuing EU government bonds to finance all members of the euro zone.
Meanwhile, ECB chief Mr Trichet warned banks to avoid paying out dividends and bonuses and to focus instead on rebuilding themselves.
“[Banks] have to be very keen on not distributing packages but to put it back to the strengthening of their balance sheet, to reinforce their stocks and their own funds,” he said. Banks should “do their job, which is to finance the real economy”.
China’s vice-premier Li Keqiang, who is tipped to succeed Wen Jiabao as premier in 2012, rejected criticism that Beijing had not done enough to fix its export-led economic model. He avoided any reference to exchange rate policy, which has brought China into conflict with the US, or other contentious topics such as Google, Iran or internal political reform.
China has come under pressure internationally to revalue its currency as it is regarded as being kept artificially low, preventing foreign competitors from making substantial gains in China.
Canadian prime minister Stephen Harper warned against the Group of 20 leading nations taking isolated measures that are rooted in self-interest, such as maintaining falsely low currencies, in a veiled reference to China.
Mr Harper, whose country hosts the G8 and G20 summits in June, said that financial regulation must have “right purposes and must not be excessive”.
