Greece faces D-Day after 'difficult' bailout talks halted

BRUSSELS, Belgium - Greece on Sunday faced a final EU summit to clinch a deal that would stop Athens crashing out of the euro after divided eurozone ministers halted "very difficult" talks on a new bailout overnight.

Saturday's meeting of the Eurogroup, comprising finance ministers from the 19-nation single currency area, was supposed to pave the way for all 28 European Union leaders to sign a final agreement at an emergency summit the following day, billed as the last chance to keep Greece in the euro.

But skeptical nations demanded more commitments from Athens, amid claims Berlin had drawn up an "internal paper" for Greece to leave the eurozone for five years, while Finland reportedly decided not to accept any new rescue plan for debt-laden Greece.

Eurogroup chief Jeroen Dijsselbloem said the "issue of credibility and trust was discussed" by ministers, who are wary of the Greek government's commitment to enacting the new reforms which closely resemble those rejected by voters in a surprise referendum.

"We haven't concluded our discussions. It is still very difficult but work is still in progress," said Dijsselbloem after nine hours of grueling talks, adding that they would resume Sunday morning at 0900 GMT.

Finnish Finance Minister Alexander Stubb was more upbeat, despite reports that Finland's parliament has decided it will not allow the government to accept any new bailout deal for Greece.

"We are making good progress," he said.

EU Commissioner for economic affairs Pierre Moscovici, who has been among the most sympathetic to Greece's plight, said: "I am always hopeful."

'Climate not easy'

Creditor institutions have called a new reform plan from leftist Greek Prime Minister Alexis Tsipras for a third bailout worth more than 80 billion euros ($89 billion) a positive step forward after months of wranglings.

The proposals, including pension cuts and tax hikes, were approved by the Greek parliament in the early hours of Saturday despite opposition within Tsipras's ruling radical Syriza party.

But Germany's hardline Finance Minister Wolfgang Schaeuble poured cold water on early optimism at the start of the talks, accusing Athens of repeatedly reneging on its commitments.

"Definitely we cannot trust promises," Schaeuble said. "In the last months hope has been destroyed in an incredible way, even up to just a few hours ago."

A European source said the German finance ministry had even drawn up an "internal paper" for Greece to leave the eurozone for five years if it fails to improve its bailout proposals, but added it was not distributed at Saturday's meeting.

Another source close to the negotiations said the "climate is not easy" and Greek Finance Minister Euclid Tsakalotos was in contact with Athens to see how to restore eurozone confidence in Greece.

The Athens News Agency, meanwhile, reported that Greek government sources believed "some countries, for reasons that have nothing to do with the reforms and the program, don't want an agreement." The sources did not name specific countries.

Even if an agreement is reached, at least eight parliaments will have to weigh in on a final accord, with Germany's Bundestag having to vote twice.

Debt mountain

Tsipras won the backing of 251 out of 300 deputies in the Greek parliament for his reform plans, even though they are similar to the ones that Greeks rejected in last week's referendum.

Athens's creditors fear it will not keep its promises after two previous bailouts worth 240 billion euros merely added to a debt mountain, now worth nearly 180 percent of the country's GDP.

Greece dived deeper into the mire when it became the first developed economy to default on a huge payment to the International Monetary Fund on June 30, the same day as its EU bailout expired.

In Greece, there is growing alarm at capital controls that have closed banks and rationed cash at ATMs for nearly two weeks, and Economy Minister Giorgos Stathakis warned the restrictions will likely stay in place for "months."

Queueing Saturday at a cash machine in Athens, Vassilis Papoutsoglou, 52, said: "We still don't know what will happen tomorrow. Can we expect something better, or is it Armageddon?"

The Greek government hoped the parliamentary vote would give it a mandate to continue the talks with creditors -- but it also revealed the depth of opposition to fresh austerity.

Three senior government figures were among 10 MPs who abstained or voted against, and several others from the ruling leftist Syriza party stayed away, prompting commentators to predict a government shake-up.

Tsipras told parliament the plan was "marginally better" than the proposals put forward by the creditors last month and that Greeks would "succeed not only in staying in Europe but in living as equal peers with dignity and pride."

source: interaksyon.com

Europe tensely awaits Greek voters' decision

BERLIN - German Chancellor Angela Merkel and other EU leaders await with trepidation the outcome of a referendum in Greece Sunday that is already dividing opinion in Europe and could even shape its future.

After months of fruitless talks with its creditors, Greece's dramatic bid to place a bailout decision in the hands of its people will have an impact far beyond the heavily-indebted country's borders, analysts warn.

The vote on whether to support Greece's radical left-led government in its tough anti-austerity line is a "signpost" for future negotiations, said Julian Rappold of the German Council on Foreign Relations.

With fears a "No" vote could lead to Greece exiting the eurozone -- a so-called "Grexit" -- Pawel Tokarski of the German Institute for International and Security Affairs said its impact would reach much further.

It will "determine the future trajectory of European integration," he said.

Merkel, seemingly sanguine last week in remarking that Europe could "calmly" await the result of the referendum because the bloc was "strong," has been at the forefront of efforts to resolve the crisis.

Now, the head of Europe's biggest economy is "faced with a dilemma," Rappold said.

If Greece were to leave the euro, it would signify the failure of Europe's crisis management that Merkel has championed though years of economic turbulence.

"She would not like it to be said that she pushed Greece out of the euro," Rappold added.

She also fears unforeseen economic consequences, a boost for anti-euro groups in some countries and that a "No" vote would be seen as a sign of weakness by nations such as Russia or China, he added.

But if Greek voters defy Tspiras and vote "Yes," Merkel must win parliamentary approval for negotiations on a new aid program for Greece amid growing dissent within her conservative party on the Greece issue.

She would also have to win over a bailout-weary public tired of picking up a lion's share of the bill.

'Nein', 'Oxi'

But the referendum is not just dividing Greeks.

Germany's Bild mass-market daily, which has taken a tough line with Athens since the start of the crisis, held its own referendum, asking readers if they wanted to go on supporting Greece with billions of euros.

It said the response indicated that 89 percent of the 200,000 people who took part said "Nein."

Thousands of Greece supporters meanwhile took to the streets of Barcelona, Paris, Dublin, and Frankfurt to show solidarity with the Greek people and hit back at European policies.

Merkel was greeted by placards stating "Oxi" (no, in Greek) at an event in Berlin Saturday for her Christian Democratic Union party's open day.

In Spain, which has endured its own economic crisis, allies of Greece's Syriza party see the referendum as an historic opportunity to change Europe, months before the country holds its own polls.

Parties on the political right however fear a spread of radical leftist policies.

If Italians were called to vote like the Greeks, 51 percent would support tough measures imposed by Europe to avoid crashing out of the euro, while 30 percent would vote against, according to a recent poll by Ipsos.

And Britain, too, where voters will be called to decide on its future in Europe, sees a particular resonance in the Greek bid.

Different interpretation

Elsewhere among Europe's leadership, European Central Bank chief Mario Draghi will also dread a "No" vote.

He is not accountable to voters but nevertheless is in "an extremely difficult situation," Tokarski said.

Through its emergency funding, the ECB is keeping Greek banks afloat. If it were to stop these loans, it would risk pressing the "Grexit" button -- a decision its chief wants to leave to the politicians.

For now though, the post-referendum scenario is far from clear, especially as the question being posed is open to wide interpretation.

Athens argues it means saying "No" to new austerity measures proposed by creditors in return for aid.

But this proposal has in the meantime expired, leaving others to interpret the referendum as a vote for or against the euro.

"Whatever the result, it will be interpreted differently by political forces in Greece and in the eurozone," Tokarski warned.

source: interaksyon.com

Greece submits fresh plan on eve of EU emergency summit

ATHENS, Greece - Greek Prime Minister Alexis Tsipras presented new proposals to European leaders Sunday aimed at ending his country's debt crisis, on the eve of a summit that could determine whether Greece crashes out of the eurozone.

In a telephone call with German Chancellor Angela Merkel, French President Francois Hollande and European Commission President Jean-Claude Juncker, Tsipras detailed a "mutually beneficial deal", the Greek premier's office said in a statement.

Italian Prime Minister Matteo Renzi urged the two sides to seize a "window of opportunity", saying all conditions were in place for them to reach a "win-win accord".

Athens said its new proposals were aimed at reaching a "definitive solution" to the five-month standoff between Athens and its creditors -- the European Commission, International Monetary Fund and European Central Bank -- as fears deepened over a potential "Grexit" from the eurozone.

The heads of the 19 eurozone countries will hold an emergency summit on the crisis in Brussels on Monday under pressure to prevent Greece from defaulting on its debt with a June 30 payment deadline fast approaching.

Sanity will prevail

The head of Greece's biggest bank said she thought "sanity will prevail" on Monday.

"To enter into such uncharted waters and take up all the risk both for the eurozone and for Greece for two or three billion (euro) difference, I think it's insane," National Bank of Greece chief Louka Katseli told BBC radio.

Greece's anti-austerity government met Sunday to refine its proposals, while a European source said Tsipras and Juncker "held talks Saturday and will again speak Sunday", adding that there were many exchanges and "informal work under way to find a solution".

Failing a deal, Greece is likely to default on an IMF debt payment of around 1.5 billion euros ($1.7 billion) due on June 30, setting up a potentially chaotic exit from the eurozone.

Last Wednesday the Greek central bank put the risk in stark terms saying: "Failure to reach an agreement would... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and -– most likely -– from the European Union."

The IMF was called in to help rescue Greece at the end of 2009 when the debt-plagued country could no longer borrow on international markets.

The EU's involvement in the huge bailout, which was to provide 240 billion euros ($270 billion) in loans in exchange for drastic austerity measures and reforms, runs out at the end of this month, but IMF support was supposed to continue to March 2016.

Talks between Greece's radical-left government and its lenders have been deadlocked for five months over the payment of the final 7.2 billion euro tranche of the bailout, with talk also turning to an extension of the European help.

For the Greek government any extension of the bailout should be about kickstarting the country's devastated economy and not further austerity.

They also want an easing of the country's crippling debt burden, which officially stood at 312.7 billion euros, or 174.7 percent of gross domestic product, in March.

The international lenders have rejected a series of proposals from Athens, insisting on their own mixture of cuts and reforms.

Minister of state Nikos Pappas, who is close to Tsipras, said the counter-proposals would be "unacceptable to whichever Greek political party" was in power.

Bridging the gap

Alekos Flambouraris, another Tsipras minister, said Saturday that Athens would propose reworked measures that "bridge the gap", while also predicting that Greece's creditors would not be satisfied with the gestures, Greek media reported.

"You'll see they won't accept loosening budget (restrictions), or our proposal on the debt," he said of two main sticking points in the talks.

But the country's Finance Minister Yanis Varoufakis, whose flamboyant style has irked many of his European counterparts, turned the tables by putting the onus on the leader of paymaster Germany to do a deal.

"The German chancellor has a clear decision to make on Monday," he wrote in an op-ed for the Frankfurter Allgemeine Zeitung.

"On our side, we will come with determination to Brussels to agree to further compromises as long as we are not asked to do what the previous (Greek) governments have done: accept new debt under conditions that offer little hope for Greece to repay its debts," he wrote, without specifying the compromises.

Demonstrators around Europe on Saturday took to the streets to protest against spending cuts and austerity measures taken by their governments, and expressing solidarity with Greece.

source: interaksyon.com

Wall St falls as Greek deadline looms; indexes up for week

NEW YORK - U.S. stocks fell on Friday ahead of a summit next week that could decide whether Greece will need to print its own currency and ditch the euro.

Euro zone leaders are scheduled to meet on Monday night in a last-ditch effort to reach a deal with Athens. As bank withdrawals across Greece ballooned to about 4.2 billion euros this week, the European Central Bank boosted its emergency funding for Greek banks.

Friday's decline in stocks "has to do with the meeting on Monday," said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. "It's sort of the last lifeline they are going to throw out to Greece and people are selling ahead of that because of the uncertainty."

Lip said, however, that any sharp selling because of developments on Monday could be yet another buying opportunity for investors in U.S. stocks.

"If Greece leaves the union, that removes an uncertainty and is actually good for the markets over the long run; if there is a resolution, that is also good," said Lip. "In some way, whatever happens on Monday is a win-win and (a market selloff) is a buyable dip."

The Dow Jones industrial average fell 101.56 points, or 0.56 percent, to 18,014.28, the S&P 500 lost 11.48 points, or 0.54 percent, to 2,109.76 and the Nasdaq Composite dropped 15.95 points, or 0.31 percent, to 5,117.00.

For the week, the Dow gained 0.6 percent, the S&P added 0.7 percent and the Nasdaq, which had closed at a record high on Thursday, rose 1.3 percent.

Utilities led the S&P 500 decline in percentage terms, down 1 percent as a group after gaining 2.7 percent over the previous three sessions.

A market debut fizzled, with shares of 8point3 Energy Partners down 2.4 percent at $20.49. It offered 20 million shares that priced at $21, the top-end of the filed range.

ConAgra Foods' shares jumped 10.9 percent to $43.37 after activist hedge fund Jana Partners took a stake in the company. ConAgra's peer Pinnacle Foods rallied 8.6 percent to $46.81 after earlier hitting a record high of $47.21.

Macerich slumped 6.8 percent to $76.87. Sources told Reuters Simon Property Group was selling its ownership stake in the No. 3 U.S. mall operator. Simon fell 1.3 percent to $179.48.

KB Home rose 9.4 percent to $16.37 after the homebuilder's quarterly results beat estimates.

Declining issues outnumbered advancing ones on the NYSE by 1,788 to 1,257, for a 1.42-to-1 ratio on the downside; on the Nasdaq, 1,557 issues fell and 1,254 advanced for a 1.24-to-1 ratio favoring decliners. The S&P 500 posted 29 new 52-week highs and 2 new lows; the Nasdaq recorded 161 new highs and 40 new lows.

About 7.9 billion shares changed hands on U.S. exchanges, above the 6.03 billion daily average so far this month, according to BATS Global Markets.

source: interaksyon.com

Oil up from early sell-off as Brent sets 2015 high

NEW YORK - Oil closed up after a weak start on Tuesday, with Brent crude rising to a 2015 high of $63 a barrel as short-covering returned to a market depressed earlier by worries about euro zone stability.

Threats to Middle East crude production and the falling U.S. oil rig count seemed to spur market bulls despite global inventory data suggesting an oversupply of up to 2 million barrels per day, analysts and traders said.

"We're in this mode where the market continues to discount bearish news," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. "Certainly there is some positive news out there about Libya and rest of the Middle East, but I don't see anything that's overly bullish."

Options for the front-month March contract in U.S. crude oil also expired on Tuesday, possibly adding to the rebound, brokers said. A similar upward move was observed a month ago when options expired in the previous front-month contract for U.S. crude.

Brent oil's front-month contract for April delivery settled up $1.13 at $62.53 a barrel, rebounding from the day's low of $60.27. The session peak of $63 was the highest since Dec. 18.

U.S. crude futures for March CLc1 closed up 75 cents at $53.53, versus an intraday low at $50.81.

Oil prices slumped about 60 percent between June and January on fears of a supply glut. Since February began, they have rebounded more than 10 percent on short-covering spurred by speculation that the market had hit bottom and concerns about fighting in the Middle East.

Violence in Libya has shut all major ports and oil exports from the country have collapsed to just a trickle.

Iraq's semi-autonomous Kurdistan Regional Government has threatened to withhold oil exports if Baghdad failed to send its share of the budget.

The International Energy Agency's chief economist Fatih Birol said on Tuesday the rise of Islamic State presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.

Market bears, meanwhile, point to a Reuters poll that shows U.S. commercial crude oil stockpiles likely rose again in the week ended Feb. 13 to record highs above 420 million barrels.

Oil was down earlier in the day after Greece rejected an international bailout plan. In east Ukraine, pro-Russian rebels and government forces fought street-to-street, further dampening hopes that a European-brokered peace deal will end the conflict.

source: interaksyon.com

Exports, spending pull euro zone out of recession in second quarter

BRUSSELS - A rebound in exports and a return to spending by households and governments pulled the euro zone out of recession in the second quarter of this year, data showed on Wednesday, in the first signs of recovery after the bloc's longest slump.

Stronger-than-expected growth from Germany to Portugal helped the euro zone's economyexpand 0.3 percent in the April-to-June period, the European Union's statistics office Eurostat said in its first breakdown of the data.

Exports to the rest of the world rose sharply in the quarter after six months of falling sales, while government spending made its first positive contribution to the economy since late 2009 whenGreece plunged the euro zone into its debt crisis.

The softening of the austerity policies that many economists blame for worsening the euro zone's longest ever recession was also accompanied by the first quarterly rise in household spending since late 2011.

Cuts in public sector spending from education to health aimed to curtail budgets that ballooned during the boom of the euro's early years, but record unemployment has meant Europeans are buying less and forcing companies to cut output and staff.

The euro zone's fragility was evident in the muted shopping of Europeans during July, when retail trade volumes increased just 0.1 percent, Eurostat said in a separate release.

That was not enough to make up for the 0.7 percent fall in June and was below economists' expectations for a 0.4 percent increase in the month.

Economists now expect economic growth to continue in the third quarter of this year following positive business surveys in August, but there are few hopes of a rapid recovery.

"We do not interpret a second consecutive solid gain as the start of a strong upturn," said Christoph Weil, an economist at Commerzbank. "After all, the imbalances in the periphery have yet to be fully corrected and several core countries are increasingly facing problems," he said in a report.

source: interaksyon.com

Germany, France pull euro zone out of recession

BRUSSELS - The German and French economies grew faster than the United States in the second quarter, pulling the euro zone out of its longest recession.

Growth in the 17-country bloc was 0.3 percent from the previous quarter, with its two biggest economies both revealing unexpected strength, data from the European Union's statistics office Eurostat showed on Wednesday. A Reuters poll had forecast 0.2 percent.

Germany grew 0.7 percent, its largest expansion in more than a year thanks largely to domestic private and public consumption.

France's economy expanded 0.5 percent, pulling out of a shallow recession to post its strongest quarterly growth since early 2011. The turnaround was driven by consumer spending and industrial output, although investment dropped again.

That compared with around 0.4 percent growth in the quarter - 1.7 percent annualized - in the United States, considered one of the bright spots of the global recovery.

"For next year, our projections show the (European) recovery should be on a more solid footing, as long as we can continue to avoid new political crises and detrimental market turbulence," EU Economic and Monetary Affairs Commissioner Olli Rehn said.

He added there was no room for complacency.

Improvement was noticeable elsewhere in the bloc. Bailed-out Portugal's GDP leapt 1.1 percent in the quarter due to higher exports and an easing of previous investment contraction.

Austria and Finland also saw improved growth.

But recession continued in The Netherlands, as well among the debt-laden periphery including Spain and Italy.

"The return to modest rates of economic growth in the euro zone as a whole won't address the deep-seated economic and fiscal problems of the peripheral countries," researchers at Capital Economics wrote in a note.

Uneven, bumpy recovery ahead

Recent economic data and sentiment surveys had suggested the German economy was picking up after contracting in late 2012 and a weak start to 2013.

But look south and a different picture emerges.

The International Monetary Fund said earlier this month that Madrid's reform program, fiscal consolidation and crackdown on external imbalances were bearing fruit, but that urgent action was needed to create jobs and stimulate growth.

The scope and form of the austerity drive in the European Union is now changing. Policymakers still say adjustments in excessive deficits and high debt are essential. But they now emphasize that any action taken must not choke growth and must help create jobs.

European Central Bank President Mario Draghi said this month that labor market conditions remained weak, though he expected the bloc's growth to benefit from a gradual recovery in global demand.

"Overall, euro area economic activity should stabilize and recover at a slow pace. The risks surrounding the economic outlook for the euro area continue to be on the downside," Draghi said after the ECB rate meeting on August 1.

Beyond the euro zone

In emerging Europe, the Czech Republic exited recession in the second quarter while the European Union's other bigger eastern economies improved, although there was little sign yet of the outright optimism among consumers needed to drive a stronger upturn.

Headline numbers showed the Czechs as expected firmly back in positive territory with growth of 0.7 percent compared with the first quarter. Hungary grew 0.1 percent and Poland 0.4 percent.

The pickup in emerging Europe is expected largely to have come from improvement in Germany and other larger euro zone countries to which the region's cheap and flexible businesses send much of their exports.

source: interaksyon.com

Euro zone economy falls deeper into recession

BERLIN/PARIS - The euro zone slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank markedly at the end of the year.

It marked the currency bloc's first full year in which no quarter produced growth, extending back to 1995.

Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, the EU's statistics office Eurostat said on Thursday, following a 0.1 percent drop in output in the third quarter.

The drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a Reuters poll of 61 economists.

For the year as a whole, gross domestic product (GDP) fell by 0.5 percent.

Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.

The big economies set the tone.

Germany contracted by 0.6 percent on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.

France's 0.3 percent fall was also slightly worse than expectations.

Worryingly for Berlin, it was export performance - the motor of its economy - that did most of the damage although economists expect it to bounce back quickly.

"In the final quarter of 2012 exports of goods declined significantly more than imports of goods," the German Statistics Office said in a statement.

The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full euro zone figures.

Back revisions to the French figures showed its output fell by 0.1 percent in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.

While the European Central Bank's pledge to do whatever it takes to save the euro has taken the heat out of the bloc's debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.

French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.

Economists say the euro zone may also shrink in the first quarter of 2013 although more resilient Germany is expected to rebound.

"The chances that the (German) economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards," said Andrea Rees, chief German economist at UniCredit.

"The question is how strong the first quarter will be. We expect growth of 0.3 percent but it could be more."

Dutch GDP dropped 0.2 percent over the quarter, keeping it in recession, while the Austrian economy shrank at the same rate.

Weak periphery

For the more embattled members of the currency bloc, matters are of course worse.

Italy suffered its sixth successive quarterly fall in GDP - this time by a sharp 0.9 percent - putting it into a longer slump than it suffered in 2008/2009.

Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.

With an election due on February 24/25, all sides in a three-way race between Monti's centrist bloc, Pier Luigi Bersani's center-left coalition and Silvio Berlusconi's center-right are pledging to cut taxes to try to kickstart economic growth.

Spain, the euro zone's fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7 percent contraction in the fourth quarter.

Madrid is also pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.

There are signs that countries like Spain are starting to benefit from harsh internal devaluations - marked by wage falls and job losses aimed at making companies leaner and more productive.

The ECB predicts the euro zone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.

More recent data for January have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is likely to be seen in Germany first.

"The debt crisis has ebbed significantly and the global economy has turned up," said Joerg Kraemer at Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

source: interaksyon.com