China posts trade deficit, Greece offered loan aid

There were two interesting pieces of economic news over the weekend.

On Saturday, we had China reporting a trade deficit. From AFP/CNA:

China posted its first monthly trade deficit in six years in March as imports rocketed, far outstripping the growth in exports, customs officials announced Saturday.

Commerce minister Chen Deming had warned last month that the deficit was likely, but said it would only be a short-lived phenomenon for the nation's export-dependent economy.

Customs authorities said China's exports rose 24.3 percent in March to 112.1 billion dollars from the same month a year earlier, while imports soared 66 percent year-on-year to 119.3 billion dollars.

The trade deficit stood at 7.2 billion dollars, they said.

Perhaps more significantly, on Sunday, a rescue package was announced for Greece. Bloomberg reports:

European governments offered debt- plagued Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro.

Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three- year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund.

“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.”

Just last week, Stephen Jen had warned of a risk of a Greek default. Again from Bloomberg:

Greece may default on its debt as early as this year without “extraordinary” financial assistance from the European Union and International Monetary Fund, said Stephen Jen at BlueGold Capital Management LLP.

The challenges facing Greece are similar to those that confronted Argentina, which defaulted on $95 billion of debt in 2001, as the government enacts austerity measures to narrow the European Union’s biggest budget deficit, Jen, managing director at the hedge fund, said today in an interview in London. That may drive the Mediterranean nation into a recession, he said.

“A default may be ultimately unavoidable,” Jen said. “That eventuality may only be postponed by aid many times bigger than the 25 billion euros ($33 billion) people have in mind.” Any assistance needs to “impress the market,” he said.

We'll soon know how impressed the market is by the rescue package.