S&P Warns Of Greek Default

Rating Agency Standard & Poor have stated that the proposed Greek rescue plan essentially constitutes a default.

London, UK (Pryce Warner International) July 5th, 2011 – S&P stated that if the proposed rescue package is implemented it will declare that Greece has defaulted.

The present rescue package would see banks invest €30bn of maturing Greek debt into new bonds issued by the Greek government which would not mature for 30 years. Sale of these would be severely limited and they would have an interest rate set against Greece’s GDP.

This proposal has won strong support in Germany, who at present shoulder a large proportion of the burden of bailing out Greece, as the German government is keen to get private investment help carry the weight.

However S&P have stated that this plan is in effect the same as debt re-structuring. This is because investors would get less value than what was promised from the securities. The rating agency also noted that without this package Greece would find it virtually impossible to afford its debt.

While some have praised S&P’s announcement, others have suggested that it is overly pessimistic. It now remains to be seen whether or not this will prompt a change of tactic in how the EU tackles the issue of Greece’s sizeable debt.

This news comes as the Greek government has approved a five-year austerity plan in the hopes of reducing the nation’s budget deficit. Expats living and working in Greece may face tough times ahead as the austerity measures are set to make deep cuts across all services.

The immediate impact will likely be a higher cost of living and a reduction in the value of the property market. Should Greece ultimately default, or worse, revert back to the Drachma, the problems will likely become much more devastating.

The proposed austerity measures are set to make deep cuts in everything from healthcare to the railway service, and there are plans to sell of €50bn worth of national industries.

Many Expats have understandably expressed concerns about the impact of the austerity measures or a potential default on their financial situation. In the wake of many British Expats having to leave Spain due to financial problems, it seems possible that the same may happen in Greece.

Though the final plans for how to deal with Greece’s debt have not been finalised due to the announcement by S&P, it may be time for Expats in Greece to prepare for the worst.

Pryce Warner International Group provide International Asset & Investment Management, Independent Financial Advice & QROPS Overseas Pensions.

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By: Aneil Fatania
Financial Editor
Pryce Warner International Group
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