By Colin Barr
June 24, 2010

Wagers against Greece are so popular that you have to be a millionaire to place a bet.

The cost of insuring against a Greek debt default spiked 20% to a new high Thursday, according to CMA data.

It now costs $1.1 million annually for five years to protect against the threat that the Greek government will fail to honor its obligations. That’s four times the going rate at the end of the year.

Trading in the credit default swap market implies there is a 68% chance of a default in Greece within five years. That number had recently hovered between 40% and 50% before shooting up this week.

The surge comes as the financial leaders of the G-20 nations prepare to meet this weekend in Toronto. European leaders, struggling to address slow growth and massive government borrowing needs, have been bracing for spending cuts and tax increases. That sets up a possible clash with the United States, where President Obama has been urging caution on the subject of belt tightening.

Meanwhile, Greece’s financially stressed southern European peers Portugal and Spain have been taking a beating in the bond markets. The premium they pay to sell debt has been rising, and the Financial Times reports their banks’ borrowings from the European Central Bank have surged.

Of course, this may not be a sign of panic. FTAlphaville suggests the move could be tied to end-of-month portfolio changes.

Even so, a record is a record. It’s early yet, but this is shaping up as one oppressively hot summer.

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