Athens and its creditors have until 24 May to reach a deal to unlock bailout funds and start debt relief
Latest: Tsipras says eurogroup meeting was successfulBut Syriza MPs are worriedGreek bonds and shares surgeIntroduction: New deadline of 24 May
The positive mood which followed Monday’s Eurogroup meeting on Greece has helped lift European markets, along with some upbeat company results and a strong start on Wall Street. Investors shrugged off renewed concerns about a slowdown in China, with commodity companies recovering from early losses, and Brent crude rising 3.8% to $45.29 as supply issues resurfaced. The final scores showed:
The International Monetary Fund is reportedly doing a wait and see act after Monday’s Eurogroup meeting:
#IMF still feels it has nothing substantial to add after latest #Eurogroup; awaits for final decisions, not roadmaps. (/via @KaterinaSokou)
And the yield – or interest rate – on Greek bonds have fallen to their lowest level this year. The 10 year yield is down 66 basis points to 7.47% as investors hold out hope that the country has moved closer to a bailout agreement with its creditors.
Greece’s stock market is up by 3.15% at 629.29, helped by the optimism following Monday’s Eurogroup meeting.
Following today’s +3.15%, #Greece stock market almost erased the year to date losses to just 0.3%. #economy #markets #stocks
Looks like the Greek government is getting on with things ahead of the new 24 May deadline of the next Eurogroup meeting.
#Greek gvt started drafting bill on remaining issues (NPLs, privtz fund, contgc mech) required 2 close review; 2 b voted bef May 24-gvt srcs
The US market has been supported by the latest jobs data. This showed job openings – a sign of confidence in the employment market – rising from 5.61m to 5.76m in March, and is a positive development after Friday’s weaker than expected US non-farm payroll numbers. Connor Campbell, financial analyst at Spreadex, said:
Whilst the market enthusiasm for the day’s Greek good news began to wane this afternoon a strong US open helped secure a decent chunk of the morning’s European gains.
Continuing to make do with a selection of B-tier data the Dow Jones was nevertheless lifted by Tuesday’s improved Jolts job openings figures, especially following last Friday’s non-farm disappointment. The number hit its best level since the financial crisis at 5.76 million, surpassing both expected 5.55 million and the last month’s upwards-revised 5.61 million. This helped push the Dow to a 160 point rise after the bell, the index crossing the 17850 mark for the first time in a week.
US markets are sharply higher in early trading, helping give some support to flagging European shares.
The Dow Jones Industrial Average is currently up 155 points or 0.8% while the S&P 500 opened 0.5% ahead, as higher oil prices boosted energy shares.
The European Bank for Reconstruction and Development is set to
* take over the management of its first batch of bad loans from Greek banks in the coming weeks.
In an interview with Reuters EBRD director Sabina Dziurman said the move should mean the bank would spend more in Greece this year than the €320m last year. The EBRD has already invested €250m in equity stakes in Greece’s four biggest banks.
And more: soaring car sales.
#Greece car sales soar 24.5 pct, to 14,452 in April highest since July 2010 https://t.co/QExwRkPYrG #economy pic.twitter.com/QVaCXuBllA
Earlier there was a raft of Greek economic data.
Industrial production fell 4% in March, compared to a 3% decline in February. There was a 23.8% drop in mining production and a 2.5% fall in manufacturing production.
The main Greek stock index has hit its highest level of the year.
The Athex general composite index is up almost 3%, driven by relief that Greece’s next bailout instalment could be signed off at the May 24 eurogroup meeting.
“There continues to be disagreement, in the creditors’ camp in particular, about the way forward,” DZ Bank strategist Hendrik Lodde said. “Because of the diverging opinions…talks are presumably going to drag on even further.”
Greek bonds are continuing to rally today, pushing down the interrst rate on the debt to the lowest level this year:
#Greece’s 10-year yield is down 53 basis points at 7.54% — at its lowest level in five months.
Wisely, Alexis Tsipras also urged his cabinet to avoid sounding too upbeat:
“Greece is leaving behind six years of recession and darkness. I want to repeat, this is not the right time for celebrations.”
Greek prime minister Alexis Tsipras just declared yesterday’s eurogroup meeting a success.
Tsipras has told his cabinet that the commitments to debt relief show that his country is not isolated within Europe.
Greece is not alone and isolated. It enjoys the support of political forces and governments which have finally realised that this country and its people have the right to turn a page.
“today #greece is not alone and isolated,” pm @alexistsipras tells his cabinet after landmark #eurogroup
#greek PM gives jubilant speech be4 cabinet applauding success of his gov’s negotiating team tt has resulted in “roadmap” 2 debt reduction
The mood around the cabinet table. #Tsipras #Greece https://t.co/n3aPS2Nj7v pic.twitter.com/xnaUmUcEeI
Greek MPs in Alexis Tsipras’s Radical Left party have told us they are appalled that they will soon be forced to vote through yet more measures before their bailout review can be concluded in two weeks.
“How can we, in all honour and honesty, return to our constituencies and face voters? Even with our heads covered a lot of us now don’t want to confront them.”
We mentioned earlier that eurozone officials are worried about Greece’s debt sustainability.
Well, the Wall Street Journal has now produced an excellent chart showing the official forecasts for Greece’s borrowings over the next few decades.
People on the streets of Athens don’t share the optimistic mood in the financial markets today.
Many Greeks are simply struggling to make ends meet after years of austerity cutbacks and tax rises, as our correspondent Helena Smith reports:
In his tiny shop in downtown Athens, Kostis Nakos sits behind a wooden counter hunched over his German calculator. The 71-year-old might have retired had he been able to make ends meets but that is now simply impossible. “All day I’ve been sitting here doing the maths,” he sighs, surrounded by the undergarments and socks he has sold for the past four decades.
“My income tax has just gone up to 29%, my social security payments have gone up 20%, my pension has been cut by 50 euros; they are taxing coffee, fuel, the internet, tavernas, ferries, everything they can, and then there’s Enfia [the country’s much-loathed property levy]. Now that makes me mad. They said they would take that away!”…
Excellent overview of a Greek crisis coming back to the boil again. https://t.co/DewNa0vZN3
Wolfango Piccoli, analyst at Teneo Intelligence, reckons the new three-pillar approach to Greek debt solution should win the crucial backing of both Germany and the IMF.
That’s because it effectively kicks the issue into the long grass until 2018, when the current bailout expires.
The idea is to address debt sustainability in the short term via strategies of debt management (including options such deferred interest rate payments, lock-in interest rates and adjusting the repayment schedule), in the medium term (post program conclusion in 2018 conditional upon the successful implementation of the ESM program) via interest rates, grace periods, and potentially by usage of SMP and ANFA profits, and in the undefined longer term by looking, if necessary, into undefined additional debt measures to ensure Greece’s debt sustainability.
This three-segment structure achieves two things. It offers reassurance to the IMF that the question of debt sustainability will be addressed both immediately and then, in a more substantial manner, at the conclusion of the program. At the same time, it delays this painful conversation in Berlin to 2018, a date after the next Bundestag elections in September 2017. This structure should therefore allow the IMF to participate and the Bundestag – which will decide in a full plenary session – to greenlight the deal.
French finance minister Michel Sapin has issued a statement applauding Greece’s efforts.
On the reform programme, Sapin says:
The first aim of the French Government is to honor and support the considerable efforts that have been made by the Greek government and this majority. From the point of view of France, the Greeks proved that we could trust them.
Latest cracker in The Chronicles of Michel Sapin (courtesy of French economics ministry) pic.twitter.com/dsOIbCDw3h
Swiss bank UBS believes yesterday’s eurogroup meeting yielded several positive developments for Greece.
This is the first time there is clarity on debt relief as well as a clear signal that Eurozone member states are willing to act on Greek debt. Additionally, the allusion to lower long-term primary surpluses is arguably not only macroeconomically sensible but a way to satisfy the political desideratum of keeping the IMF involved in the Greek bailout.
Finally, the above helps the Greek government build its success story via programme compliance, thereby incentivising it to persist on the conciliatory path with its creditors.
Greek government bonds are jumping in value this morning, as traders welcome the eurozone’s commitment to granting Athens some debt relief.
The yield, or interest rate, on Greek 10-year bonds has hit a six-month low as money pours back into Greek debt.
#Greece 10-year GGB bond yield falls below 8% for first time since Nov 2015 following positive #Eurogroup statement. pic.twitter.com/pNGEkY2t4i
#Greece stock market climbs 2.5% with increased trading activity in the aftermath of #Eurogroup results. #economy #markets
Yesterday saw the greatest opponents of debt relief, Germany, hint that they were open to the possibility of debt relief and an agreement will be sought.
It will come as no surprise that the stick that accompanies this carrot is to enact long needed further pension and spending reforms.
#Germany finally agrees in principle to some form of #Greece debt relief. Conditional and unclear, but still progress. Badly needed
A couple of Greek front pages today:
Headlines after Eurogroup@ethnosgr:White smoke for review&debt@etyposgr:Wage&pension cuts w/out illusions#Greece pic.twitter.com/TNxhFWM3yz
European stock markets are rallying in early trading, partly driven by hopes of a deal between Greece and creditors in two weeks time.
With the Eurogroup finally holding their first serious discussion about Greek debt relief there was a sense of tentative hope in the air after Monday’s meeting.
Now all that has to be done is for the country to outline a post-fiscal target failure contingency plan AND implement some more unpopular reforms in the next fortnight, before the finance ministers meet once against on the 24th May. Easy!
Eurozone ministers are desperate to avoid another Greek crisis this summer that might drive Britain into leaving the EU.
So argue The Times today:
#EU may bail out Greece for €billions to prevent #UK #VoteLeave on 23rd June reports @thetimes pic.twitter.com/pwSbKTd1Zu
Newsflash from Athens: prime minister Alexis Tsipras will brief cabinet ministers at 1pm local time, or 11am BST.
After y’day €Group, PM Tsipras calls cabinet meeting today at 1pm local #greece #eu
Greek pensions and wages would be cut again if the country is forced to implement the ‘contingency measures’ agreed with creditors at last night’s meeting in Brussels.
Greek newspaper Kathimerini explains:
The proposal for the automatic mechanism sent by Athens indicated that apart from some welfare spending, no form of expenditure would be protected from automatic reductions. This includes pensions and public sector wages, even though the coalition had repeatedly indicated that it would like to ringfence them.
Analysts at Canadian bank RBC have a neat summary of yesterday’s developments in Brussels:
As expected yesterday’s Eurogroup did not sign off on the first review of Greece’s third programme but there was progress on the so-called ‘contingency measures’ that Greece has been asked to legislate for.
Ministers agreed that they would allow Greece to legislate a ‘mechanism’ for additional measures if budget targets are off-track. Technical talks, including with the IMF, on the proposal will now take place before the Eurogroup now meets again on May 24th.
The Financial Times has given Germany the credit for helping to break the deadlock between Greece and its creditors, by easing its objections to debt relief talks.
The political space for a deal was opened on Monday by the readiness of Wolfgang Schäuble, Germany’s finance minister, to explore ways to ease Greek debt repayments.
He had, until then, strongly resisted such talks as unnecessary, putting IMF participation in the programme in doubt.
Greek debt negotiations have turned a breakthrough corner so many times in the past that we are all dizzy.
At the heart of the Greek crisis is the question of whether Athens’ borrowing can ever be tackled, or will spiral further out of control.
And documents presented to eurozone ministers yesterday, and seen by Reuters, suggest serious concerns over this issue.
If the main ESM scenario were to prove accurate, the euro zone, Greece’s main lender, could achieve Greek debt sustainability through three actions:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The clock is ticking for Greece again today, after eurozone finance ministers set a deadline of May 24 to reach a deal to unlock €5bn of bailout cash.
Related: Greek finance minister hails ‘very good’ meeting on debt relief – as it happened
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