April 22nd, 2011
04:40 PM GMT
It does not take much to get the market in Athens agitated these days. Not a trading session goes by without rumors of a pending restructuring of Greek debt.
But what seemed on the surface to be a straightforward exchange of internal thoughts at Citigroup created a storm matching the famously dry Meltemi winds that are a trademark of Mediterranean summers.
An email from London-based bond trader for Citigroup Paul Moss, the contents of which were shared from a government source, raised concerns Wednesday about “increased noise over Gr [Greek] debt restructuring as early as this Easter weekend.”
A close examination of the email shows Moss was not suggesting that the restructuring was happening, but that market interest rates and general discussion in the trading pits were suggesting this may transpire.
According to a Greek government spokesman, the email was widely circulated among the Athenian trading community and – worse yet – the domestic media, on the afternoon of April 20. That day, the Greek stock market tumbled 2.6 percent to a 2011 low, and Greek 10 year bonds hit a record high of 14.95 percent as a result.
For its part, Citigroup immediately said it will collaborate with authorities but added that the company “do not consider there to have been any wrongdoing by Citi or its employees”.
So what was intended to be “internal” went “external-global” in a hurry, and what was a local Greek investigation quickly got bumped up to Interpol, the Europe-wide police force.
The timing of the Citigroup email also sounded alarms in Greece, where conspiracy theories abound. The storm came during the Easter Holy Week, the most important holiday of the year for Greeks and when most start to escape to the islands for a break.
Nearly a month ago, a local car mechanic took matters into his own hands. On Greek Independence Day, he turned to the local blogosphere to spread rumours about a bank default. Even an erroneous source can wreak havoc in an atmosphere of distrust and dire economic circumstances.
The reality is that the debt mountain is large and despite all efforts by the government of George Papandreou to put forth additional cuts, finance minister George Papaconstantinou has admitted the debt to GDP ratio may soar to 160 percent before coming back down again. The economy is contracting by 3 percent this year, with a hope of turning positive in 2011.
The debt mountain is nearly a half trillion dollars for an economy which has a GDP of $321 billion. As a result, talk of debt restructuring in Athens will persist regardless of the outcome of the police investigation surrounding Citigroup and the wayward attempts of a Greek mechanic.
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