Greek borrowing costs are rising as a fresh funding crisis looms.
Yields on 10-year government bonds are above 7.6% this morning, while the yield on two-year bonds are above 10%, the highest since last summer.
The IMF’s latest report on Greece contained a few startling graphics, including this one:
Greece has not managed to return to sustainable growth, with output having contracted by more than 25% since 2008, investment down by more than 60%, and unemployment at the highest level in the eurozone.
Michael Hewson, chief market analyst at CMC Markets, says a fresh crisis in Greece would be bad timing politically across Europe:
Fresh splits between the EU and IMF threaten to open a massive rift after the head of Eurogroup Jeroen Dijsselbloem criticised the IMF for being overly pessimistic about Greece’s prospects, saying that Greece was making good progress.
The IMF on the other hand disagrees and appears unwilling to throw more money at a problem with no end unless EU creditors look at debt forgiveness, given the unsustainability of the current debt trajectory.
A fresh flare up in the Greek crisis is particularly difficult timing given the proximity of elections in Holland, France and Germany, and a €7bn debt repayment due in July.
The agenda: Investors fear fresh debt crisis looms in Greece
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Greece is back in the headlines this morning following the fresh impasse that has emerged between its European creditors and the International Monetary Fund.
In broad terms, the IMF believes Greek debts are unsustainable and on an “explosive path”, raising doubts about the Fund’s participation in the funding programme.
The IMF wants to see Greek offered debt relief from its European creditors, who have so far ruled that out.
Responding to the IMF’s latest assessment, the eurogroup’s president Jeroen Dijsselbloem said there would be no such debt forgiveness, adding:
It’s surprising because Greece is already doing better than that report describes.
We will be bringing you all the latest updates and commentary.