Awwal 14, 1432 / April 18, 2011, SPA -- Greek officials denied again on Monday that some form of debt rescheduling was imminent as sources within the German government said Athens was likely to do so before the end of the summer, Reuters reported. Financial markets are increasingly convinced Greece will have to renegotiate the terms of its public debt, recognising that its economy cannot grow fast enough to service a burden that is set to swell to 160 percent of national output. German government sources said on Monday that Athens, which is struggling to impose national belt-tightening aimed at regaining creditors' faith, would not avoid opting for a restructuring before the end of the summer. But officials have repeatedly insisted that such a move would prove costlier in the long run and Bank of Greece Governor George Provopoulos told shareholders on Thursday it would hurt banks and pension funds, and shut access to capital markets. "The Bank of Greece has explained with clarity since last October that such a (restructuring) option is not necessary, nor desirable," he said. "It would have catastrophic consequences." The government denied a Greek newspaper report that it wants to extend maturities on its outstanding debt, echoing dismissals from EU and IMF officials. But both that report and the signals from Germany served to convince investors something is in the pipeline, hitting debt markets and the euro on Monday and keeping yield spreads of Greek government paper over German bunds near record highs. "Decisive voices within the federal government expect that Greece will not make it through the summer without a restructuring," one high-ranking German coalition source told Reuters. The 10-year market interest rate on Greek debt rose to a record 1,135 basis points, higher than peaks last year when Greece asked its EU and IMF partners for a 110 billion euro bailout. -- SPA
