Why the UK, Although Deep in Debt, Is Not Greece
As investors across the world wait for the second Greek bond auction of the year, the rest of Europe is going out of its way to distance their own problems from those facing the government in Athens.
With speculation about when the Greeks will go back to the market to raise money, the country's Public Debt Management Office was forced to release a statement claiming it was not already soliciting funds despite calling on one bank for advice on market conditions.
The unnamed bank in question would be forgiven for asking the Greek government one simple question: who is backstopping your debt sale? There are signs that demand for any Greek debt is high on the assumption that any offering will enjoy implicit backing from Berlin.
Unfortunately, with uncertainty surrounding the size of any support or bailout for Greece high, Athens is rightly nervous about dipping its toe into the market for a debt sale that could set the tone for its exit from crisis - or not.
As investors await further clarity on the bond auction, others were telling the market the UK is not Greece mark two.
Maturity Is the Key
Mervyn King, the governor of the Bank of England says Britain is not in the same situation as Greece. Admittedly the UK, while highly indebted and forecast to run significant budget deficit this year, is in a weak position.
In its favor though are two factors. One is the fall of the pound over the last two years, which King believes has been a massive boost to Britain's competitiveness as an exporter.
Greece would love to be able to devalue its way out of the crisis, but what really differentiates the two economies is the length of maturity of their respective outstanding sovereign debt. The UK's average maturity sits at well over 10 years, meaning it has far more wiggle room that Greece over refinancing.
Derek Halpenny from Bank of Tokyo-Mitsubishi UFJ believes the refinancing timing is the key to the UK's assertion that it is not a crisis in waiting. Ultra-loose policy from the Bank of England and the weaker pound have clearly helped Britain, but the debt market still demands a full percentage point above Germany to buy UK debt.
So while Greece waits for the right time to test the market, Britain can afford to wait and see, at least for the time being. Sooner or later the bond market is going to want the UK to provide a credible plan to reduce borrowing - and whoever forms the next government in May knows that only to well.