Slovakia Does Not Support Greece While Norway Invests In Greek Bonds
Slovakia, for example, refused to support the bilateral loan granted to Greece.
According to Reuters, Slovakia has provided a negative example by refusing to support a loan granted to Greece and the European Central Bank (ECB) will not support the entry of other countries in the euro area without ensuring that they will not act the same in future, said President of the ECB, Jean-Claude Trichet.
A memo from this week’s meeting of euro zone finance ministers, seen by Reuters, said Trichet was outraged at the refusal by Slovakia to participate in the Greek bailout.
Several EU officials said privately Slovakia could be snubbed by some of the 26 other EU member states because its decision is likely to complicate talks on the bloc’s budget, making the rich net payers less willing to grant aid to poorer countries.
“Trichet was outraged at the last Eurogroup by Slovakia’s refusal of a bilateral loan to Greece and said that had the ECB known Slovakia would behave like that, it would not have endorsed Slovakia’s euro adoption,” the memo summarizing the discussion said.
“It sets a bad example for future candidate countries. Also (he said) that the ECB would not back future euro zone applicants if there is a risk they will do something similar.”
The aid package will go ahead despite the refusal by the Slovak parliament, but Bratislava’s position dealt a blow to euro zone unity in the face of the financial crisis and Slovakia has run into sharp criticism from European governments.
However, the Slovak position has been backed by the Czech Republic, a country that has taken a slow approach toward euro entry and currently has no target date.
On the other hand, Norway seems to be pleased with Greece’s development and will invest in Greek bonds.
According to Bloomberg, Norway, a country that built the world’s second largest sovereign fund, said Greece will not reach the default and invests heavily in Greek bonds, saying that the long-term benefits will justify the risks assumed at this point.
Government Pension Fund Global, the fund of $ 450 billion controlled by Norway, also acquired bonds in Spain, Italy and Portugal, other European countries seen as being exposed to a possible debt crisis because of possible financial and tax problems.
The Norwegian Minister of Finance, Sigbjoern Johnsen, said he supports the sovereign fund’s strategy, which although contributed to a loss of 3.4% on European fixed income investments in the second quarter also registered important gains on bonds in Asia and in the U.S.A.
“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc., in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.”
The Norwegian officials say the long-term perspective that they based their acquisitions will prevent their possible loss.
The Nordic nation’s $450 billion Government Pension Fund Global has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas.
Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”
The fund, which manages Norway’s oil and gas wealth, mostly buys securities in proportion to their importance in global indexes. By using its leeway to stray from those benchmarks using so-called active management, the fund has beaten those measures by an annual average of 0.3 percent since 1998.