Eurozone inflation back to positive; Brexit worries weigh

BRUSSELS, Belgium—Eurozone inflation left negative territory in June, statistics showed Thursday, but economic uncertainty from Brexit sparked concerns that damaging deflation could return to Europe.

The rise in consumer prices is welcome news after months of an unprecedented stimulus program by the European Central Bank to jumpstart sluggish growth and low prices in the eurozone.

Consumer prices in June rose a slight 0.1 percent after slipping 0.1 percent in May, the EU’s Eurostat statistics agency said. This was higher than the zero percent forecast by analysts surveyed by data provider Factset.

“Amid the heightened uncertainties triggered by the Brexit vote, some cheery news for the ECB as the eurozone exited deflation in June,” said Howard Archer, chief economist at IHS Global Insight.

Energy prices again drove consumer prices lower, dropping by 6.5 percent, but this was far less than the negative 8.5 percent a month earlier.

Faced with low prices, the European Central Bank has embarked on a series of unprecedented stimulus programs in a desperate battle to kick-start sluggish growth and inflation in the eurozone.

Slow eurozone growth has seen inflation slide in and out of negative territory, threatening a dangerous downward spiral of falling prices and wages. The ECB aims to get inflation back to two percent or just below, a level it deems healthy for growth.

But analysts warned that knock-on effects from the shock decision by voters in Britain to leave the EU could reverse any progress made towards boosting inflation and growth.

At an EU summit on Tuesday, ECB head Mario Draghi warned leaders that the fallout from Brexit could cost the eurozone up to 0.5 percent in GDP growth over the next three years.

“Uncertainty over the effects of Brexit could add to downward pressure on wage growth and increase firms’ reluctance to raise their prices in the coming months,” said Jennifer McKeown, senior European economist at Capital Economics.

The Frankfurt-based central bank this month took the controversial step of buying corporate bonds, its latest weapon in the fight against deflation that also includes negative interest rates for banks.

Critics in powerful Germany however charge that the ECB is overstepping its mandate by lavishing billions on corporate giants and say it could be distorting markets and creating bubbles.

The ECB has already made unprecedented amounts of ultra-cheap loans available to banks on condition they pass it on as credit for businesses and households.

The ECB has also embarked on a major asset purchase program known as quantitative easing, or QE.

source: business.inquirer.net

Eurozone summit reaches deal on Greek bailout

BRUSSELS — European Union’s summit chair Donald Tusk said on Monday that eurozone leaders have unanimously agreed on a bailout deal for Greece.

In a tweet, Tusk said the European bailout program for Greece includes “serious reforms” and “financial support.”

The European Union’s top economy official earlier said he was hopeful for a deal to keep Greece in the euro — and that the German and French leaders will be at the center of it.

Pierre Moscovici played down ideological differences among Greece’s European creditors on Monday, telling France’s RTL radio that the marathon overnight negotiations show there is a “shared willingness to ensure that Greece remains in the euro.”

Earlier also in the negotiations there had been indications of splits among the European countries, with German Chancellor Angela Merkel demanding tough conditions before releasing aid while French President Francois Hollande prioritized unity among the nations that use the euro.

Moscovici said Merkel and Hollande have “solid and direct” relations despite ideological differences and that “there is no solution for Europe” without agreement between the eurozone’s two leading powers.

source: business.inquirer.net

Hong Kong stocks plunge more than 4% on China, Greece fears

HONG KONG, China – Hong Kong equities dived 4.26 percent by mid-morning Wednesday, as contagion from China’s stock rout spread into regional markets and on fears about Greece’s future in the Eurozone.

The Hang Seng Index had plunged as low as 4.97 percent in morning trade, and was at its lowest point since mid-March.

Hong Kong investors have been buffeted by two crises, with the sell-off in mainland markets coming as Greece edges closer to a Eurozone exit after a Sunday referendum rejected creditors’ plans to reform its bailout.

The Shanghai Composite Index slumped 6.97 percent, or 259.72 points, to 3,467.40. The Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 4.07 percent, or 78.61 points, to 1,854.22.

“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch,” Zheng Ge, an analyst at Wanda Futures Co., said by phone in Beijing.

Mainland markets have plunged around a third in just over three weeks and investors are now worried about the spill-over effect on the already struggling Chinese economy. Bloomberg News reported that trading has been suspended on more than 1,200 shares in China.

Mainland investors have lost confidence in the Chinese stock market which is spurring them to sell off in Hong Kong, said financial analyst Castor Pang.

“The main reason the Hong Kong market is going down is because these two markets (Shanghai and Hong Kong) have high correlation, with many mainland companies listed in both,” said Pang.

A stock link-up between the Hong Kong and Shanghai exchanges saw investors flood in to the Hong Kong market from April, boosted by a long-running rally in Shanghai.

The stock connect program was initially met with little interest when it began in November, but mainland authorities’ decision in March to expand the number of fund-management firms allowed to buy in Hong Kong saw activity surge.

“A lot of Chinese investors who are trading through the stock connect are trying to withdraw money from the Hong Kong,” said Pang, adding that share value in many smaller firms was dropping more than 20 percent a day.

“Those who are investing in both the Hong Kong and China stock markets have no choice but to sell their shares in Hong Kong,” Pang said, with some unable to trade on the Shanghai market after Wednesday’s share suspensions, he said.

If the sell-off continued, it would become a “chaotic situation” said Pang, head of research at Core Pacific-Yamaichi.

On Tuesday European leaders gave Athens until the weekend to come up with a debt reform plan or be ejected from the currency union.

source: business.inquirer.net

US stocks follow European equities lower

New York–Wall Street stocks Tuesday finished lower, following European markets downward after political turmoil in Greece revived worries about the eurozone.

The Dow Jones Industrial Average lost 55.16 points (0.31 percent) to fall below 18,000 at 17,983.07.

The broad-based S&P 500 dropped 10.22 (0.49 percent) to 2,080.35, while the tech-rich Nasdaq Composite Index fell 29.47 (0.61 percent) to 4,777.44.

Equity markets in Britain, France and Germany each fell more than 1.2 percent after Greece’s Prime Minister said a snap election for president planned for Jan. 25 would determine whether the country leaves the eurozone.

US consumer confidence rose in December, while home-price increases were more modest in October, data showed.

Analysts said trade was limited ahead of Thursday’s New Year’s holiday.

“Basically, the volume is light and there is no specific theme that is driving the stock market,” said Hugh Johnson of Hugh Johnson Advisors.

“It’s more or less just trend-less and volatile. I wouldn’t attach much significance to what’s going on today.”

Civeo, which provides workforce accommodations to oil and natural resources companies in Canada and Australia, sank 52.6 percent, citing the weak oil-investment environment. Civeo projected 2015 revenues of $540-$600 million, much below the $817 million forecast by analysts.

Real-estate investment trust American Realty Capital Properties rose 7.4 percent after activist investor Corvex Management disclosed a 7.1 percent stake in the company and said it would press for changes to boost shareholder return.

Bond prices fell. The yield on the 10-year US Treasury fell to 2.19 percent from 2.21 percent Monday, while the 30-year dipped to 2.76 percent from 2.78 percent. Bond prices and yields move inversely.

source: business.inquirer.net

Dow, S&P 500 hit record highs after ECB stimulus

NEW YORK–The Dow and the S&P 500 Thursday bolted to new records after the European Central Bank launched aggressive measures to stimulate fragile eurozone growth and avert deflation.

The Dow Jones Industrial Average advanced 98.58 points (0.59 percent) to 16,836.11 while the broad-based S&P 500 rose 12.58 (0.65 percent) to 1,940.46.

The tech-rich Nasdaq Composite Index posted strong gains, leaping 44.58 (1.05 percent) to 4,296.23.

US markets reacted enthusiastically to a series of new measures from the ECB, which lowered all three of its key interest rates, including putting the deposit rate into negative territory for the first time, meaning banks will be charged for depositing their excess cash with the central bank.

“Expectations were for them to take action and the market is applauding the action that has been taken,” said David Levy, portfolio manager at Kenjol Capital Management.

Analysts said the ECB’s new push means liquidity will remain at high levels globally even as the Federal Reserve scales back its asset-purchase stimulus.

Levy said a 1.8 percent gain in the Russell 2000, a leading index of small cap stocks, was particularly bullish.

“It shows confidence in the market that investors are willing to invest in riskier stocks,” he said.

Leading banks had a good day, including Dow member JPMorgan Chase (+1.7 percent), Citigroup (+1.6 percent) and Wells Fargo (+1.2 percent).

General Motors fell 0.7 percent after chief executive Mary Barra announced the company fired 15 employees over the deadly ignition scandal and uncovered a pattern of “incompetence and neglect” behind the debacle.

US telecom giant Sprint is nearing a deal valued at about $32 billion to acquire rival T-Mobile, according to the Wall Street Journal and others. Sprint fell 4.0 percent, while T-Mobile dropped 2.3 percent.

Amazon jumped 5.5 percent on anticipation of a June 18 mystery event with founder Jeff Bezos. Topeka Capital Markets said the buzz is that Amazon will launch a smartphone, which could boost subscriptions to its “Prime” service.

Videogame developer Zynga sank 9.2 percent on concerns about a conference presentation from chief Don Mattrick. Mattrick “seemed slightly less upbeat” than normal about the company’s prospects, said a note from Sterne Agee.

Bond prices rose. The yield on the 10-year US Treasury fell to 2.58 percent from 2.61 percent Wednesday, while the 30-year dropped to 3.43 percent from 3.45 percent. Bond prices and yields move inversely.

source: business.inquirer.net

Ireland officially exits recession

DUBLIN — Bailed-out eurozone nation Ireland exited recession in the second quarter with economic growth of 0.4 percent thanks to solid expansion of its construction sector, official data showed on Thursday.

Ireland fell into recession in late 2012 but returned to growth in the three months to June of this year, the Central Statistics Office (CSO) said in a statement.

Ireland’s economy had contracted during the previous three quarters, the CSO confirmed. A recession refers to two or more consecutive quarters of negative growth.

“Preliminary estimates for the second quarter of 2013 indicate that GDP increased by 0.4 percent in volume terms on a seasonally adjusted basis compared with the first quarter of 2013,” the CSO said.

Ireland’s economy shrank by 0.6 percent in the first quarter.

A breakdown of the latest data showed that Ireland’s construction sector grew by 4.2 percent in the second quarter compared with the first three months of the year.

Ireland’s economy meanwhile contracted by 1.2 percent in the second quarter compared with the equivalent period in 2012.

Ireland was rescued with an 85-billion-euro ($115-billion) bailout from the International Monetary Fund and the European Union in late 2010.

Its economy had been through a period of turmoil in the run-up to the 2008 global financial crisis and after, amid soaring government debt, a property market meltdown, banking crisis and surging unemployment.

Thursday’s data precede what is set to be another painful austerity budget due in a few weeks, with many commentators suggesting a return to growth may offset extra spending cuts or tax hikes.

source: business.inquirer.net

French banks turn corner after turbulent year

PARIS–French banks are back in the good graces of investors after turning in surprisingly strong quarterly results that appear to show they have put the worst of the eurozone crisis behind them.

Top French bank BNP Paribas turned in a 4.7 percent drop in earnings to 1.76 billion euros for the April to June period, a much smaller fall than had been expected by the market.



Meanwhile Credit Agricole reported that its second-quarter profits soared 60 percent to 1.39 billion euros and Societe Generale also largely beat expectations at 955 million euros.

“They are good results in general for the three banks” even if the asset sales and write downs they undertook last year to react to the eurozone crisis made for difficult comparisons, said Gabriella Serres, an analyst at Aurel BGC brokerage.

The price of shares in BNP Paribas has risen by 3.4 percent since the reporting season began two weeks ago, while Credit Agricole’s shares rose by 12.4 percent, and Societe Generale’s shot up by 17.4 percent.

Meanwhile the overall CAC 40 index has risen by 2.7 percent.

“Whether you look at the direction of the results or capital base, the results held up pretty well, especially in comparison with the rest of Europe,” said Cyril Meilland, a bank analyst at Kepler Cheuvreux brokerage.

Between maintaining new capital adequacy requirements, markets roiled by the eurozone crisis and economic slowdown, French banks have been under pressure to trim their sails.

In 2012 Credit Agricole sold at a loss its Greek unit Emporiki and parted with its brokerage Cheuvreux. Societe Generale also offloaded its Greek unit, Geniki, and sold its stake in US asset manager TCW.

The three banks also scaled back their corporate and investment bank operations, and reduced their holdings of risky stocks and bonds.

At the same time they launched cost-cutting programs: 900 million euros over three years at Societe Generale, 650 million euros over three years at Credit Agricole and BNP is aiming for 2.0 billion euros over four years.

The results for the first half of this year thus looked favorable compared with outcomes for the same period last year, when the banks were forced to book exceptional charges.

But with business activity by these banks holding steady, or even growing, despite the recession in France, investors were pleased.

The banks also managed to keep under control their provisions for loans that risk not being be repaid, another closely watched figure by investors in tough economic times.

“The good news of the quarter is the level of provisions, because instead of what one could expected with the economy doing a bit worse, we have seen quite a few units post provisions lower than in the first quarter, which is very reassuring” said Meilland.

He said the improvement was in part due an improvement in the economic outlook, but also to the way banks had managed their balance sheets and loan portfolios since the crisis began.

But Serres said that although the banks had made progress on reducing costs, they still have some way to go with reducing risky loans and improving revenues.

And the IMF in its latest report on France, released this past week, warned that “low bank profitability remains a risk factor” to the country’s economy.

It added that “the French financial system would need to adapt further to prudential requirements, notably in regard to bank funding structures, which continue to rely heavily on wholesale funding.”

source: business.inquirer.net

Japan ready to help in euro crisis at G8 talks

WASHINGTON — Japan said that it stood ready to extend help in stemming the eurozone’s debt crisis as the Group of Eight major industrialized nations opened crisis talks.

Japan, the world’s third largest economy and only Asian power in the elite G8 club, has already been a major contributor to an IMF firewall aimed at holding back Europe’s woes with a $60 billion commitment unveiled last month.

Japan’s Prime Minister Yoshihiko Noda will argue in the talks that Europeans hold foremost responsibility in addressing the crisis, foreign ministry spokeswoman Naoko Saiki told reporters on Friday.

“At the same time, in order to help the Europeans solve the European debt crisis, Japan is ready to extend its assistance,” Saiki said.

“The European sovereign debt crisis may endanger the health of the world economy, so we would like to encourage the Europeans to cope with the matter appropriately as soon as possible,” she said.

Further assistance by Japan could include support for the International Monetary Fund or efforts to increase the safety net in Asia, she said.

The G8 talks at the US presidential retreat of Camp David look set to pit President Barack Obama and newly elected President Francois Hollande, both advocates of pro-growth policies, against German Chancellor Angela Merkel who has championed austerity measures.

Japan straddles both positions in the G8. It has sought to stimulate its economy after last year’s tsunami tragedy but Noda is championing a politically risky plan to double sales tax to rein in a giant public debt.

Noda will hold his first meeting with Hollande on Saturday aimed at part at discussing a proposal to launch talks on an ambitious free trade agreement between Japan and the European Union, Japanese officials said.

source: japantoday.com

Greek left attacks 'barbarous' austerity

(Financial Times) -- Greece is heading for a clash with international lenders as the radical leftwing party that came second in the weekend's election called for the ripping up of a "barbarous" austerity programme underpinning its bailout and questions mounted about the country's future inside the euro.

Alexis Tsipras, the 38-year-old leader of the Syriza party that surged in popularity in Sunday's poll, outlined a five-point plan to be put to conservative and socialist leaders on Wednesday as he attempts to build a coalition, demanding the reversal of fiscal and structural measures that have enabled Greece to slash its budget deficit.

However, in an unusually blunt intervention, Jörg Asmussen, a European Central Bank executive board member, for the first time raised the possibility of a Greek exit from the euro -- an option the ECB had previously refused to acknowledge in public.

"Greece needs to be aware that there is no alternative to the agreed reform programme if it wants to remain a member of the eurozone," Mr Asmussen told Handelsblatt, the German business newspaper.




Fears of a Greek exit hit financial markets, with stock markets across Europe falling, the US S&P 500 hitting a two-month low by midday in New York and investors buying safe US Treasuries, German bunds and UK gilts.
Greece searching for a solution

Syriza overtook the centre-left Panhellenic Socialist Movement (Pasok) in Sunday's poll, winning 16.78 per cent of the vote to Pasok's 13.18 per cent thanks to large gains in Athens and Piraeus, the country's largest constituencies.
Markets spooked by Greek political limbo

"Voters rejected the barbarous policies in the bailout deal; they abandoned the parties that support it, effectively abolishing plans for sackings [of public sector workers] and additional spending cuts," Mr Tsipras said.
Elections leave Greece in 'paralysis'

His plan would involve ripping up Greece's second €174bn bailout agreement, putting the banking sector "under state control", reversing labour reforms, calling a moratorium on national debt repayments and moving to proportional representation.

Greek stocks fell to 20-year lows while in Paris the CAC 40 slid 2.8 per cent and Germany's Xetra Dax closed down 1.9 per cent. The euro slipped 0.3 per cent against the dollar to $1.3022.

"Greece in itself isn't a big issue, but what does matter of course is the knock-on effects and contagion fears and what that would mean for the wider market," said Adrian Cattley, European equity strategist at Citi.




Mr Tsipras has three days to attempt to form a coalition government, although analysts expected the two main parties, Pasok and the conservative New Democracy, to reject the plan out of hand, a move that is likely to lead to a fresh election in June.

One conservative official called Syriza's position "irresponsible".

Analysts said Syriza wanted to win first place at the next election by taking a hardline stance against reforms backed by the EU and the International Monetary Fund aimed at rescuing Greece from bankruptcy and an exit from the eurozone.

Young, unemployed Greeks flocked to vote for Syriza at the election, along with self-employed professionals opposed to the liberalisation of their closed shops and older leftwingers facing further pension cuts under an €11.5bn package due to be approved by the incoming parliament.

"Some people interpreted the election result as a vote of anger. They are making a mistake. It was a mature and conscious choice," Mr Tsipras said.

source: CNN

Asian markets slip after weak Spain debt auction

HONG KONG - Asian markets were hit by renewed eurozone fears on Thursday after a weak Spanish auction raised the prospect that it could be the next country to be hammered by a debt crisis.

The news out of Madrid, as well as another batch of poor data from the eurozone, compounded downbeat sentiment after the US Federal Reserve indicated it would not provide any new stimulus to the economy in the near term.

Tokyo fell 0.53 percent, or 52.38 points, to 9,767.61 and Sydney shed 0.33 percent, or 14.3 points, to 4,319.6 while Hong Kong slipped 0.95 percent, or 197.98 points, to 20,593.00.

Taipei fell 1.56 percent, or 121.03 points, to 7,639.82.

But Seoul gained 0.50 percent, adding 10.16 points to close at 2,028.77.

Shanghai, returning after a three-day break, jumped 1.74 percent, or 39.45 points, to 2,302.24 after Beijing on Wednesday hiked the amount of cash foreigners can invest on the nation's markets from $30 billion to $80 billion.

Spain's borrowing soared Wednesday in its first debt auction since an austerity budget last week, fuelling concern among traders of a rerun of Greece's strife last year when it narrowly avoided a messy default.

Madrid is racing to slash its public deficit to reassure markets that it will not follow Greece -- as well as Ireland and Portugal in needing a bail-out -- after it missed its 6.0 percent public-deficit target last year.

Adding to the country's problems is the fact it is heading back into recession, while the unemployment rate is tipped to hit 24.3 percent, according to government estimates.

And on Tuesday Budget Minister Cristobal Montoro warned that national debt will jump sharply to 79.8 percent of GDP this year from 68.5 percent last year.

"The rising cost of Spanish debt reignited fears in Europe as investors sold off equity investments," Miguel Audencial, sales trader at CMC Markets, said in a note.

"Lower-than-expected European retail sales figures and German factory orders both confirmed that a full recovery is still far from reach," Audencial said, according to Dow Jones Newswires.

The Spanish concerns come less than a week after eurozone finance chiefs agreed to boost a firewall aimed at avoiding another crisis on the scale of Greece.

Also Wednesday a study showed eurozone private sector activity retreated last month, adding to evidence that the region is in recession.

The composite Purchasing Managers Index (PMI) compiled by the Markit research firm hit a three-month low 49.1 points from 49.3 in February. A score below the neutral 50-point mark indicates contraction.

The news added to market gloom after minutes from the Fed's most recent policy-setting meeting showed it will play a wait-and-see game before further easing monetary policy, meaning there will be less liquidity.

"Apprehensions on the future state of the US economy in a world without quantitative easing overshadowed the slightly higher-than-expected ADP employment data," Audencial added.

Payrolls firm ADP said that while fewer jobs than expected were created in the private sector in March, figures for prior months were revised upwards.

Employment increased by a seasonally adjusted 209,000 last month, down from a revised 230,000 in February, and lower than forecasts of 217,000 net new positions. However, estimated gains for February rose 14,000, and for January by 9,000.

The figures come ahead of Friday's key government numbers, which include the public sector jobs and the unemployment rate.

Europe's woes overshadowed the jobs figures on Wall Street. The Dow sank 0.95 percent, the Nasdaq was down 1.46 percent and the S&P 500 shed 1.02 percent.

On currency markets the euro bought $1.3140 and 108.04 yen in late Asian trade, compared with $1.3141 and 108.35 yen in New York late Wednesday. The dollar was also at 82.22 yen, compared with 82.46 yen.

Oil prices bounced back from heavy losses late Wednesday in New York, where dealers staged a sell-off after the government reported a big jump in stockpiles.

New York's main contract, West Texas Intermediate crude for delivery in May, gained 87 cents to $102.34 per barrel in the afternoon, after losing 2.5 percent on Wednesday.

Brent North Sea crude for May rose $1.01 to $123.35 after it shed two percent in New York.

Gold was at $1,628.15 an ounce at 0820 GMT, compared with $1,633.75 late Wednesday.

Wellington slipped 0.36 percent, or 12.44 points, to 3,467.98.

Fletcher Building ended down 0.6 percent at NZ$6.20 and Telecom shed 1.4 percent to NZ$2.435 while Chorus was 0.3 percent lower at NZ$3.46.

Manila and Mumbai were closed for public holidays. - Agence France Presse

source: gmanetwork.com

Greece Secures History's Biggest Debt Writedown; 83.5% Of Lenders Approve

ATHENS, Greece (AP) – Greece's private creditors agreed Friday to take cents on the euro in the biggest debt writedown in history, paving the way for an enormous second bailout for the country to keep Europe's economy from being dragged further into chaos.

Greece would have risked defaulting on its debt in two weeks without the agreement, sparking turmoil in the markets and sending shock waves through the other 16 countries that use the euro.

Prime Minister Lucas Papademos called the deal – which shaves some (euro) 105 billion ($138 billion) off Greece's (euro) 368 billion ($487 billion) debt load – an important "historic success '' in a televised address to the nation Friday night. "For the first time, Greece is not adding but taking debt off the backs of its citizens.''

The country said 83.5 percent of private investors holding its government debt had agreed to a bond swap, taking a cut of more than half the face value of their investments as well as accepting softer repayment terms for Greece.

The swap aiming to turn around the country's debt-ridden economy was a key condition to secure a (euro) 130 billion ($172 billion) rescue package from other eurozone countries and the International Monetary Fund.

The managing director of the Institute of International Finance, which negotiated the deal with Greece for large investors, called the bond swap "the largest ever'' debt restructuring.

"This has been painful and the pain is not over yet. But I now can see light at the end of the tunnel for the Greek economy,'' Charles Dallara told Greece's Mega television. He estimated Greece could return to the markets "within a few years.'' If recovery continues, "I think the risk for Greece and the risk on the eurozone will be very manageable,'' he said.

Of the investors holding the (euro) 177 billion ($234 billion) in bonds governed by Greek law, 85.8 percent joined. The deadline for those owning foreign-law bonds was extended to March 23.

Creditors holding Greek-law bonds who refused to sign up will be forced into the deal.

The decision to force losses on some bondholders means that the debt relief will trigger payouts of so-called credit default swaps, a type of insurance on bonds. The International Swaps and Derivatives Association, the private organization that rules on such cases, said its committee ruled that a "restructuring credit event'' occurred.

When the debt relief plan was first announced last year, eurozone leaders and the European Central Bank worked hard to avoid a credit event because they feared the payout of credit default swaps could destabilize big financial institutions that sold them. But since then, that prospect has started to look less threatening. The ISDA said that if triggered, overall payouts will be significantly below the $3.2 billion in net outstanding credit default swap contracts linked to Greece. The exact level of payouts will be determined on March 19.

The Fitch ratings agency downgraded Greece to "restricted default'' over the bond swap – a move that had been expected. Fitch was the third agency to downgrade Greece into default, after Moody's and Standard & Poor's. The agencies are expected to raise the country's credit rating after the completion of the swap.

The finance ministers from the 17-nation eurozone said Greece had fulfilled the conditions to get approval for the bailout next week. IMF chief Christine Lagarde, meanwhile, recommended the fund chip in (euro) 28 billion ($36.7 billion) to the rescue package, which includes (euro) 10 billion left over from Greece's first bailout. The IMF's board is set to decide on the final contribution next week.

The eurozone ministers on Friday already released up to (euro) 35.5 billion ($47 billion) in bailout money to fund the debt swap. Investors exchanging bonds will receive up to (euro) 30 billion – or 15 percent of the remaining money they are owed – as a sweetener for the deal and (euro) 5.5 billion for outstanding interest payments.

source: mb.com.ph

US stocks rise on hopes of Greece debt deal

NEW YORK - US stocks finished higher Thursday, led by a 1.2 percent gain in the Nasdaq buoyed by reports that Greece had achieved the minimum support needed to push its huge private-debt writeoff through.

At the closing bell the Dow Jones Industrial Average was up 69.78 points (0.54 percent) to 12,907.11.

The broad-based S&P 500 added 13.27 (0.98 percent) to 1,365.90, while the tech-rich Nasdaq Composite rose 34.73 points (1.18 percent) to 2,970.42.

While an official statement was still awaited, a Greek government source said that enough private creditors had agreed to the debt swap program ahead of the 2000 GMT Thursday deadline to allow it to go ahead, opening the door to a broader new rescue of the teetering Greek economy.

ATHENS - Greece seemed close to clinching a high-stakes debt swap Thursday as a deadline for bondholders to accept huge losses on their Greek holdings came and went opening the way for an urgent bailout.

Hours before the cut-off, a government source said that participation had already passed 75 percent, the minimum level sought by Athens for the deal to go through.

With the threshold met, Greece was now expected to press on towards unlocking a 130-billion-euro bailout from the European Union and IMF, a process that might include resorting to so-called collective action clauses Athens introduced to force holdouts to accept the deal.

By using the clauses, Greece would get even closer to the 95 percent participation rate the EU and IMF said is necessary to reduce Greek debt to a sustainable level of 120 percent of gross domestic product in 2020.

But the clauses could also trigger anti-default insurance contracts, known as credit default swaps, whose net value was estimated at 3.2 billion euros in February.

The Greek government will make an announcement on the swap at 0600 GMT on Friday, a finance ministry source said earlier.

And eurozone finance ministers were set to review the swap in a conference call later Friday, and weigh in particular the necessity to trigger the clauses or not.

Talk that the 75 percent participation level was close to being reached trickled out throughout the day helping send stock markets sharply higher across the globe and giving leaders some confidence that a page was about to be turned.

Italian Prime Minister Mario Monti said over 60 percent of private creditors had accepted the debt swap and the global bank association that led the initiative said a deal was close at hand.

"I'm optimistic that there's going to be an agreement in the next few hours," said Charles Dallara, managing director of the International Institute of Finance (IIF) and chief negotiator for the banks involved in the debt writedown.

The writedown is the biggest attempted so far, overshadowing Argentina's $82-billion default in 2002, the equivalent of 73 billion euros at the time.

It is designed to erase more than 100 billion euros ($132 billion) from Greece's near and midterm debt and replace it with new maturities.

The exercise is meant to make repayment of the debt, currently at over 350 billion euros, more sustainable in the immediate future, thereby giving the struggling Greek economy much needed breathing room.

"Tonight at midnight, a procedure of historic character reaches completion. An operation of unprecedented size and complexity to drastically cut Greek state debt," Finance Minister Evangelos Venizelos told parliament.

Officials would need two hours after the deadline to determine the level of participation, Greek news reports said.

Greek Prime Minister Lucas Papademos said he expected maximum participation as a take-up too low would ultimately mean an even greater danger of a disorderly default that the IIF warned could cost eurozone nations one trillion euros.

European stock markets posted strong gains on Thursday following rises across Asia, and Wall Street also rose on optimism that Greece's debt swap would be successful.

Directors from the International Monetary Fund have tentatively planned to meet to weigh a new loan for Greece on March 15, spokesman Gerry Rice said Thursday.

Greece and the IIF have warned that a disorderly default could occur as quickly as March 20, when Athens is due to reimburse 14.4 billion euros in debt.

The IIF report warned that if the debt swap deal failed, it could do serious damage to the eurozone and even the global economy.

Greece's own stock exchange picked up 2.78 percent in late afternoon trade.

"Global equity markets are rallying in front of the deadline for the private-sector involvement in the Greek debt swap plan, reflecting an expectation that the deal will get done and that a disorderly default will be avoided," said Briefing Research. — Agence France Presse

source: gmanetwork.com

ECB loans out €529.5 billion to European banks

NEW YORK (CNNMoney) -- The European Central Bank announced Wednesday that banks borrowed €529.5 billion, or $712.4 billion, under a highly-anticipated lending program aimed at preventing a credit crunch in Europe.

In its second long-term refinancing operation (LTRO), the ECB offered banks unlimited three-year loans at interest rates as low as 1%. The ECB allotted nearly €500 billion in the first round of the operation in December.

The borrowing was a bit more than expected, as banks were expected to have taken up roughly €500 billion, although estimates ranged from €300 billion to €1 trillion.

"It was exactly the right amount," said Tobias Blattner, eurozone economist for Daiwa Capital Markets. "It was not too high so as to raise concern about the health of banks' balance sheets, but at the same time it was not too low to raise concerns about the ability of banks to continue to purchase the bonds of fiscally stressed countries."

Source: http://money.cnn.com/2012/02/29/markets/ecb_bank_loans/index.htm?hpt=hp_t3

Greek leaders ready to back austerity deal

(Financial Times) -- A dispute over pension cuts stalled talks last night between leaders of Greece's fractious national unity government on tough new austerity measures, one of the last hurdles to be cleared before eurozone officials can sign off on a €130B ($172B) bailout and save Athens from a messy default. However, officials said they were still confident of reaching a deal by the morning.

A statement by Lucas Papademos, the technocrat prime minister, said there was "broad agreement on all the issue except for one which demands further elaboration".

The talks between Papademos and the heads of the three Greek political parties in his cabinet included €3B ($4B) in new spending cuts contained in a 50-page document distributed to political leaders in the morning. The full cabinet is due to rubber-stamp the deal today.

After seven hours, Papademos called in the troika -- mission chiefs from the European Commission, European Central Bank and International Monetary Fund who drafted the new medium-term fiscal programme with the Greek finance ministry -- to help break the deadlock. Greece still needs to find about €300m of savings to close a €3bn program of spending cuts to keep this year's budget on track.

Papademos earlier held separate telephone consultations with Christine Lagarde, IMF managing director; Olli Rehn, the EU monetary commissioner; and Jean-Claude Juncker, chairman of the eurozone finance ministers, who are due to discuss the Greek program this evening.

People familiar with the negotiations said Antonis Samaras, the conservative leader, had raised objections to cuts in supplementary state pensions, while former premier George Papandreou refused to discuss the alternative of cutting primary pensions. The pensions issue is seen as critical as elderly, low-income Greeks have been hit hardest by the deeper than expected recession.

George Karatzaferis, the rightwing leader and junior coalition partner, left the talks. It was not clear whether he would return to join the negotiations.



There has been mounting frustration in other European capitals, including Brussels, where officials had hoped to get a deal agreed last weekend so that they could quickly execute the central pillar of the deal -- a €200bn bond swap that will see private Greek debt holders lose half their holdings, wiping €100bn off Athens' €350bn debt pile.

Once the deal is agreed, the focus of the Greek drama will turn to Paris, where the lead negotiators for private bondholders were to meet with investors to begin preparations for the debt restructuring, and to Brussels, where eurozone finance officials will meet on Thursday to cobble together enough money to keep Greece afloat for the foreseeable future.

Debate over the structure of the new bail-out package continued to intensify behind closed doors as eurozone leaders attempted to construct a programme that would both keep the total in new rescue funds at €130bn and reduce Greek debt levels to 120 per cent of economic output by 2020.

Both those goals were signed off at a summit in October, but Greece's worsening budget outlook has forced finance ministry officials to rework the package to stay within those parameters.

There was growing consensus that sufficiently reducing Greece's debt level, which is now at about 160 per cent of economic output, would require more than the agreed €100bn cut in private debt, with leaders' focus increasingly turning to the €40bn in Greek bonds held by the European Central Bank -- the largest of any single investor.

According to several senior eurozone officials, the ECB has not yet agreed to help a revised bailout plan, but it was studying whether it could forgo profits on the €40B ($53B) portfolio -- which would pay out about €55B ($73B) if taken to maturity -- by transferring the bonds to the eurozone's bailout fund, the European Financial Stability Facility, at the price it originally paid for them.

Another plan being considered would have Greece buying the bonds directly from the ECB at the depressed price, using EFSF funds or bonds to pay for them. Either scheme would require eurozone governments ensuring more EFSF funds to buy the Greek bonds -- which may prove politically impossible.

While senior officials at EU institutions and eurozone member states were hoping the ECB would agree to forgo its profits, which would knock as much as €15B ($20B) off of Greece's debt load, four officials with direct knowledge of the talks said such a deal had not yet been agreed.

Without ECB accession, officials worry it will be impossible to get Greece's debt down to levels approved by the International Monetary Fund, which has estimated that the private debt restructuring alone will only get Athens' debt to just under 130% of economic output by 2020. Without IMF approval, the €130bn in new bail-out funds cannot be approved.

Standard & Poor's, the debt rating agency, weighed in on the side of the IMF on Wednesday, saying the restructuring of privately held debt was not enough to make Greece's debt load sustainable.

"Because only a small subcomponent of investors are actually taking the haircut and the official sector [ECB] is not, or only partially, then the reduction . . . is probably not sufficient debt relief to make debt sustainable," said Frank Gill, an S&P analyst.

article source: http://edition.cnn.com/2012/02/08/business/greece-talks/index.html?hpt=hp_t2

French official: Eurozone states eye new pact

PARIS (AP) — The French budget minister says France and its eurozone partners are working on an "overhaul" of European treaties to help restore market confidence in their ability to reduce high state debt and deficits.

Valerie Pecresse has floated the idea of a governance pact among eurozone members that will include "real regulators, real sanctions" to help restore confidence in the currency union.

Speaking Sunday on Canal Plus TV, she said the eurozone's biggest economies — France, Germany and Italy — want to be the "motor" of a more integrated Europe.

Pecresse said the 17 eurozone members must show solidarity and each country must rid itself of the debt and deficit problems that are behind the continent's deepening debt crisis.

source: philstar.com