Just a few days ahead of an expected deal between the Greek government and current international bond holders, further details are being revealed of the country’s dour situation.  The headlines are alarming and helping to suppress any real gains in the Euro – currently being contained by the 1.3200 technical level.

According to European Union reports, the Greek economy sported a debt load of 159.1% of overall gross domestic product in the third quarter.  The number is alarming as the regional European Union debt to GDP ratio is closer to 87.4% – or 45% less.  The figure is also rapidly closing in on the 163% ratio that EU analysts are expecting – but will likely overshadow by the fourth quarter.  This could pose problems for the Greek government – which is currently seeking another 130 billion euros in a second bailout by the European Union.  Given the current situation, a higher than expected debt to GDP ratio is likely to spark concern as it increases the likelihood that Greece will be unable to make due on its loan obligation and deficit reduction targets.  Incidentally, Greece is expected to reduce its public debt load to 120% of GDP in the next 8 years.

Higher debt loads are likely to lead to higher yields, and with Greek short term yields already in the double digit figures, the process of financing the current public debt load would become increasingly difficult.  As a result, investors already holding Greek, may have to take bigger haircuts in order to hold onto their positions.  Current estimates have the figure at 70% of face value when the debt swap is all said and done – below initial requests for 40% by global investors.

Add in other estimates that the actual principle of the European Union bailout may be increased by another 15%, and the conditions are once again ripe for bearish Euro sentiment.

The saving grace, however, remains in the ability of European leadership to effectively deal with the current situation – along with tapping other international governments for help.  As such, the current predicament doesn’t seem set to fade into the sunset just yet – and is likely to add to downward pressure on the single currency in the foreseeable medium term.