The state of economy and public finances in Greece are of major concern to both the Greeks and the Eurozone.
With the country’s deficit at 12.7% of its GDP and debts of 113% of GDP, the country needs tough measures. If investors lose confidence in the country and its bonds then investment will plummet and a major catastrophe could happen.
This does not just impact of Greece; eurozone members will be watching this develop very closely. Major powers such as France and Germany would have to encourage a hardline approach in Greece in order to kick-start investment and save the credibility of the Euro. If they do not find a buyer of this debt then the Euro will be viewed with extreme caution, but a Brussels bail-out could have inflationary impacts on all of the member states.
Up step China. In a recent article in the Financial Times, Greece is said to be ‘wooing’ China into buying 25 billion euros of bonds. This would add to the Chinese portfolio of resource funding in Russia, South America and Australia as well as a strategic investment move towards Africa.
Today however, the Greek Finance Ministry ‘categorically’ denied this claim and Chinese officials are stating that they will leave any ‘bail-out’ to the ECB and European banks.
With a very low credit rating by both Moody’s and S&P, could the risk be too large for China?