Greece is pushed closer to a bailout
ATHENS — The financial markets pushed Greece closer to an expensive bailout after the European Union raised its estimate of the country’s budget deficit and Greece’s credit rating was downgraded. The moves caused the indebted nation’s borrowing costs to spike to apparently unsustainable levels.
Greece’s government has said it prefers to tap the bond markets and avoid using a joint eurozone-International Monetary Fund rescue package, details of which are being hammered out.
But with investors demanding punishingly high interest rates — over 8.7 percent for 10-year bonds — the chances Greece will get by without a rescue seem increasingly remote.
“Greece is in the midst of another hellish week and now faces no choice but to seek to formally activate the European rescue package,’’ said Ben May, at Capital Economics.
The European Union revised Greece’s budget deficit to 13.6 percent of gross domestic product, from 12.9 percent, and said it could be further revised.
The level is more than four times the EU limit the 16 countries that use the euro, which has been badly hit by the Greek financial crisis. Athens said its target of reducing its deficit by at least 4 percentage points in 2010 remained unchanged.
Later yesterday afternoon, Moody’s Investor Services downgraded its rating on the country’s debt to A3 from A2, and warned further downgrades were possible.