Euro Declines On Greece Jitters

The euro came under pressure on Tuesday, as Greece struggled to reach a compromise with its international creditors over economic reforms attached with the bailout deal.

Experts from the International Monetary Fund and the European Union are studying the reform proposals which Athens has proposed to unlock bailout money. While eurozone officials complained that Greece’s plans lack necessary details, Greek Prime Minister Alexis Tsipras argued that he would not submit to creditors unconditionally. Greece will run out of money by April 20 unless it receive bailout funds by then.

Eurozone inflation and jobless rate are due shortly. While the inflation is expected to fall for the fourth month in March, the pace of decline is expected to slow from last month.

In economic news, Germany’s retail sales growth eased at a slower-than-expected pace in February, preliminary figures from Destatis showed.

Retails sales grew 3.6 percent year-over-year in February, slower than January’s 5.0 percent climb, which was revised from a 5.3 percent increase.

The euro was lower against its major opponents, except the franc, on Monday. The EUR/USD pair fell by 0.5 percent yesterday, hurt by continued standoff between Greece and its creditors.

The single currency declined to 1.0744 against the U.S. dollar, its lowest since March 20. Continuation of the euro’s downtrend may lead it to support around the 1.05 zone. The pair ended yesterday’s trading at 1.0831.

The euro declined by 0.5 percent to hit a 4-day low of 0.7277 against the Sterling. If the euro extends slide, it may find support around the 0.72 mark. At Monday’s close, the pair was valued at 0.7312.

Reversing from an early 4-day high of 130.25 against the yen, the euro slipped to a 4-day low of 129.17. The next possible downside target for the euro-yen pair may be located around the 128.00 area. The euro-yen pair was worth 130.03 when it ended Monday’s trading.

Japanese housing starts declined at a slower than expected pace in February, data from the Ministry of Land, Infrastructure, Transport and Tourism showed.

Housing starts dropped 3.1 percent in February from last year, slower than January’s 13 percent decline and an expected decrease of 7 percent.

The 19-nation currency pulled back from an early high of 1.0484 against the Swiss franc, and was steady in subsequent trading. The pair was trading at 1.0460, compared to yesterday’s New York session close of 1.0476.

The euro declined to 4-day lows of 1.3675 against the loonie and 1.4375 against the kiwi, off early high of 1.3748 and a 5-day high of 1.4458, respectively. The euro is poised to challenge support around 1.36 against the loonie and 1.40 against the kiwi.

The euro moved away from an early session’s high of 1.4180 against the aussie, edging down to 1.4113. Next key downside target for the euro may be found around the 1.41 mark.

Looking ahead, Canada GDP for January, U.S. S&P Case Shiller home price index for January, Chicago PMI for March and U.S. consumer confidence index for March are set to be published in the New York session.

At 7:55 am ET, U.S. Federal Reserve Bank of Richmond President Jeffrey Lacker is expected to speak on Economic outlook in Richmond.

Danièle Nouy, Chair of the ECB Supervisory Board, will deliver a speech before the European Parliament’s Committee on Economic and Monetary Affairs on Brussels at 9:00 am ET. At the same time, U.S. Federal Reserve Bank of Cleveland President Loretta Mester moderates a policy session at a conference in Stone Mountain, Georgia.

At 3:00 pm ET, U.S. Federal Reserve Bank of Kansas City President Esther George is expected to speak on the U.S. economy in New York.

by RTT Staff Writer

For comments and feedback: [email protected]

Business News

Euro up after Greece agreement, Shanghai surges again

The euro pushed higher Friday after Greece’s promise to provide new plans to reform its bailout, while Shanghai stocks continued their latest rally towards a seven-year high.

Traders moved into the single currency after Greece’s deal with its key European partners, who agreed to finish work “as fast as possible” on completing its EU-IMF rescue programme.

But while the dollar’s rally against the euro and yen fizzled out, analysts said they expect the currency to resume its advance as the US Federal Reserve prepares for a rate hike while the Japanese and European central banks print more cash.

In equities trade, Tokyo swung from initial losses to end 0.43 percent higher, adding 83.66 points to 19,560.22, while Sydney added 0.40 percent, or 24.7 points, to close at 5,975.5.

Seoul was flat by the close, edging down 0.65 points to 2,037.24, and Hong Kong lost 0.38 percent, or 93.65 points to 24,375.24.

Shanghai rallied 0.98 percent, or 35.05 points, to 3,617.32. The market has climbed more than nine percent following an eight-session winning streak and is now at its highest level since mid 2008.

Investors welcomed news that Greek Prime Minister Alexis Tsipras had agreed to hand over a fresh package of reforms to its paymasters as his anti-austerity government tries to overhaul the terms of its bailout.

The left-wing Greek leader made the announcement after emergency talks with German Chancellor Angela Merkel, French President Francois Hollande and the European Union’s top officials on the sidelines of a European summit in Brussels. He said the bailout was “back on track”.

While the crisis is not yet over, the news will come as a relief to markets as an ongoing standoff over Athens’ bailout has raised fears it will crash out of the eurozone.

In afternoon Asian trade, the euro bought $ 1.0680 and 129.02 yen against $ 1.0660 and 128.77 yen in New York Thursday.

The dollar was at 120.73 yen, compared with 120.80 yen in US trade.

– Oil prices push lower –

The greenback has been on a rollercoaster ride this week after sinking in reaction to the Federal Reserve’s lowered expectations for interest rates and economic growth.

That cooled talk of a rate rise in early summer, sending the dollar tumbling and stocks rising. At one point in New York Wednesday, after the announcement, it fell to 119.57 yen while the euro was at $ 1.1010.

The US currency has since recovered, notching up gains over the past two days.

On Thursday the Dow eased 0.65 percent and the S&P 500 shed 0.49 percent, but the Nasdaq added 0.19 percent.

“We’re seeing a bit of profit-taking here,” Hartmut Issel, the Singapore-based head of equity, credit and macro for the Asia-Pacific chief investment office at UBS Wealth Management, told Bloomberg TV.

“I wouldn’t recommend to lose sight of the bigger picture. Yes, the Fed is currently a bit more dovish than we thought going into the meeting, but we are still talking about a very strong US economy, with a strong labour market.”

Oil prices fell further owing to lingering concerns about a global supply glut. US benchmark West Texas Intermediate for April delivery fell 47 cents to $ 43.49 and Brent crude for May slipped 23 cents to $ 54.20 in afternoon trade.

Gold fetched $ 1,172.01 against $ 1,164.38 late Thursday.

In other markets:

— Mumbai fell 0.73 percent, or 208.59 points, to end at 28,261.08.

National Thermal Power Corporation fell 6.25 percent to 145.50 rupees, while IT major Wipro rose 2.92 percent to 651.85 rupees.

–Bangkok closed down 0.14 percent, or 2.17 points, to 1,529.96.

Oil company PTT dropped 1.53 percent to 322.00 baht, while Bank of Ayudhya fell 4.15 percent to 46.25 baht.

— Taipei rose 0.13 percent, or 12.96 points, to 9,749,69.

— Wellington rose 0.20 percent, or 11.97 points, to 5,871.38.

Air New Zealand was up 1.06 percent at NZ$ 2.85 while market heavyweight Fletcher Building was unchanged at NZ$ 8.93.

— Manila ended flat, inching up 3.83 points to 7,818.38.

Universal Robina added 2.23 percent to 220.00 pesos, San Miguel Corp. fell 3.34 percent to 67.95 pesos and Philippine Long Distance Telephone dropped 1.40 percent to 2,810.00 pesos.

— Jakarta closed flat, dipping 0.75 points to 5,453.10.

Cigarette maker Gudang Garam lost one percent to 51,950 rupiah, while palm oil producer Astra Agro Lestari rose 0.49 percent to 25,750 rupiah.

— Kuala Lumpur closed down 0.30 percent, or 5.48 points, at 1,803.65.

Public Bank dropped 0.21 percent to 18.60 ringgit, Sime Darby lost 0.43 percent to 9.26 ringgit, while Tenaga Nasional gained 0.14 percent to 14.60 ringgit.

— Singapore rose 0.78 percent, or 26.28 points, to 3,412.44.

DBS Bank gained 0.50 percent to Sg$ 20.06 while real estate developer Capitaland was up 1.15 percent to Sg$ 3.52.

Euro’s Hope Lies in ECB’s Economic Projections, Not in Greece

DailyFX.com –

View photo

.

Euro’s Hope Lies in ECB’s Economic Projections, Not in Greece

Fundamental Forecast for Euro: Neutral

The Euro struggled to gain traction all week, even after the Fed’s Yellen showed her dovish feathers.

Selling into month-end provoked a break of the four-week range, and the crowd flipped to net-long in EURUSD.

Have a bullish (or bearish) bias on the Euro, but don’t know which pair to use? Use a Euro currency basket.

After churning ground for a month in between the Greek election and the ratification of the bailout extension in the German parliament, the Euro finally chose a direction – lower – and ended four-weeks of obsolescence. EURNZD finished lower by -2.17%, EURGBP by -1.91%, and EURUSD by -1.65%, with the last posting its first weekly close below $ 1.1200 since September 2003. On the surface, market participants have completely looked past the short-term resolution to the Greek funding crisis and instead remain focused on the longer-term issues that could ultimately jettison Greece from the EMU.

At least two-thirds of the Troika don’t seem convinced that Greece has a detailed path forward (we realize that the Troika – the ECB, the EC, and the IMF – is no longer being called the Troika; but if you put lipstick on a pig, it’s still a pig). The ECB warned that “the commitments outlined by the authorities [of Greece] differ from existing programme commitments in a number of areas,” while the IMF posited concern over key areas, mainly labor market reforms, pensions, and VAT policy: “[the] Greek government [is] not conveying clear assurances that [it] intends to undertake the reforms envisaged.”

Whether or not the Greeks even accept the terms of the bailout extension are up in the air as well. Greek Prime Minister Alexis Tsipras is having trouble whipping up the votes in his Syriza party, and is said to be looking at other ways of ensuring the bailout extension (even if it means bypassing the parliament altogether). Just because Greece has kicked the can by four-months doesn’t mean that the country is out of the woods at all: the banking system remains in a state of plight. Bank deposits dropped by -€12.2 billion (-7.6% m/m) in January – the largest one-month drop since the data began tracking in 2011 – with another -€11 billion rumored gone in February.

Concern around the Greek banking system rather than the optimism over the loan extension is probably more important to the Euro’s underlying dynamic at this point in time. After all, Greece remains reliant on the ECB’s ELA, even though it’s possible the waiver for non-investment grade debt will be reinstated at the ECB’s second policy meeting of 2015 this Thursday. The larger, overarching concerns about Greece are in control right now, and any positivity in the short-term has been quickly faded in FX markets.

Speaking of the ECB meeting this week, it presents itself as both a placeholder and a weigh-station. As a placeholder, we already know that the ECB is moving forward with its QE program (the EAPP, Extended Asset Purchase Program) on March 15. Considering the processes by which the €60 billion/month program will be conducted have been faintly revealed, this meeting will bring from the shadows the procedures by which the ECB expects to proceed. Such details likely leave much wanting from traders looking for salacious information to operate around.

The crux of Thursday’s meeting, however, will come in the form of the updated economic projections. With energy prices low and the Euro weak, we expect both real GDP and inflation forecasts to be boosted in the future, mainly 2016 and 2017. While the 2015 real GDP forecast will probably be nudged higher, the 2015 inflation rate will likely not; the market’s reaction around the projections will be a good indicator of the direction of the Euro for the coming weeks.

The event will be a heat check for the ECB’s credibility, no doubt. If market participants believe in the ECB’s projections, then they will concurrently figure that the September 2016 end-date for the EAPP is also reasonable; otherwise, if a credibility gap presents itself, then traders might assume more easing must be done in the future for the ECB to achieve its mandate of price stability over the medium-term – something it has failed to do over the past four years. –CV

To receive reports from this analyst, sign up for Christopher’s distribution list.

original source

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

Greek debt talks with euro zone break down, way forward uncertain

(Adds Varoufakis comments)

* Greece rejects six-month bailout extension

* Greece calls draft proposal “unreasonable”, “unacceptable”

* EU officials say talks ended until Greece changes position

* No appetite to give Greece money without guarantees- Schaeuble

By Renee Maltezou and Jan Strupczewski

BRUSSELS, Feb 16 (Reuters) – Talks between Greece and euro zone finance ministers over the country’s debt broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout as “unacceptable”.

The unexpectedly rapid collapse raised doubts about Greece’s future in the single currency area after a new leftist-led government vowed to scrap the 240 billion euro bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.

Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said Athens had until Friday to request an extension, otherwise the bailout would expire at the end of the month.

How long Greece can keep itself afloat without international support is uncertain. The European Central Bank will decide on Wednesday whether to maintain emergency lending to Greek banks that are bleeding deposits at an estimated rate of 2 billion euros a week.

“The general feeling in the Eurogroup is still that the best way forward would be for the Greek authorities to seek an extension of the programme,” Dijsselbloem told a news conference.

Greek Finance Minister Yanis Varoufakis hit back, complaining that Dijsselbloem had refused to discuss a proposal from the executive European Commission that would have given Athens a four-month breathing space in return for the new government holding off on major policy changes.

He sought to play down the setback as a temporary hitch rather than an impasse.

“I have no doubt that within the next 48 hours Europe is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary,” Varoufakis told a news conference.

Varoufakis said he rebuffed a draft statement put to him by Dijsselbloem as the meeting got under way. In comments that appeared aimed at playing on divisions among European officials, he said he would have signed a text put to him before the meeting by Pierre Moscovici, the EU’s economics commissioner.

The talks, which had been expected to last late into the night, collapsed in less than four hours.

Both sides showed signs of fraying patience, with several ministers complaining of disappoinment and fearing disaster. Dijsselbloem spoke of a need to rebuild trust and Greek officials grumbled that Varoufakis was presented with an unacceptable text as soon as he walked into the room.

Dijsselbloem pleaded with the Greeks to buy themselves time to discuss the way forward calmly by requesting an extension.

But he also said: “Would a new programme look very different? I don’t think so. The rules and regulations talk about strict conditionalities. It would still be about fiscal sustainability.”

Germany, the euro zone’s main paymaster and Greece’s biggest creditor, stuck to its hard line.

German Finance Minister Wolfgang Schaeuble said before the talks that Greece had lived beyond its means for a long time and there was no appetite in Europe for giving it any more money without guarantees it was getting its finances in order.

As the meeting in Brusssels broke up, a senior Greek banker said Greece’s stance boded ill for the markets and the banks.

“It is a very negative development for the economy and the banks. The outflows will continue. We are losing 400-500 million every day and that means about 2 billion every week. We will have pressure on stocks and bond yields tomorrow,” he said.

Varoufakis earlier spelled out in a combative New York Times article Greece’s refusal to be treated as a “debt colony” subjected to “the greatest austerity for the most depressed economy”.

“The lines that we have presented as red will not be crossed,” he said.

MONEY FLEEING

An opinion poll showed 68 percent of Greeks want a “fair” compromise with euro zone partners while 30 percent said the government should stand tough even if it means reverting to the drachma currency. The poll found 81 percent want to stay in the euro.

Deposit outflows in Greece have picked up. JP Morgan bank said that at the current pace Greek banks had only 14 weeks before they run out of collateral to obtain funds from the central bank.

The ECB has allowed the Greek central bank to provide emergency lending to the banks, but a failure of the debt talks could mean the imposition of capital controls.

Euro zone member Cyprus was forced to close its banks for two weeks and introduce capital controls during a 2013 crisis. Such controls would need to be imposed when banks are closed. Greek banks are closed next Monday for a holiday.

Leftist Prime Minister Alexis Tsipras had requested a bridge programme for a few months while a new debt relief deal is agreed to replace the existing bailout, which has already forced drastic cutbacks onto ordinary Greeks.

The current programme expires at the end of the month.

Some of the problem is semantic. The Greeks will not countenance anything that smacks of an “extension” to the old bailout or a continued role for the supervisory “troika” of international lenders. ($ 1 = 0.8785 euros) (Additional reporting by Yann Le Guernigou, Michael Nienaber, Andrew Callus, Ingrid Melander, Alastair Macdonald, Adrian Croft, Foo Yun Chee, Robin Emmott, Tom Koerkemeier and Francesca Landini; Writing by Jeremy Gaunt, Paul Taylor and Alastair Macdonald; Editing by Paul Taylor and Giles Elgood)

Greece Wants a 'New Contract' With the Euro Area

(Bloomberg) — Greece is seeking a “new contract” with the euro area on how to continue its bailout, as talks resume and both sides signal willingness to compromise, according to government officials taking part in the talks.

Greek Prime Minister Alexis Tsipras met his European Union peers at a summit for the first time Thursday and said afterwards he sees political will to agree on what happens after the current aid program expires this month. Greece’s goal remains a six-month bridge agreement that would lead to a new deal with euro-area authorities, he told reporters.

More from Bloomberg.com: One Hundred Years of Austerity

German Chancellor Angela Merkel urged Greece to move swiftly with its next request, which she portrayed as a follow-on to the current bailout program. She said her first meeting with Tsipras was “very friendly” and cited ability to compromise as one of Europe’s strengths.

“I would like them to apply for the extension as soon as possible,” Merkel said at a news conference in Brussels. “And if the goal is to fulfill it by the end of February, then I’d like the intention to fulfill it to be announced soon.”

More from Bloomberg.com: Denmark Steps Up Currency Sales as Rate-Cut Tool Shelved

Behind-the-scenes negotiations resumed in Brussels hours after euro-area finance ministers failed to reach a joint conclusion. Greek negotiators and officials from its euro-area creditors plan to meet in Brussels Friday to discuss the way ahead as they struggle to decide whether to call the arrangement an extension, a new program or a bridge deal, officials said.

Deal Elements

Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget-surplus requirement and conditions to sell off government assets.

More from Bloomberg.com: Quality Dividends Sweet Spot for EU Equities:Fowler

Greece’s willingness to hold to more than two-thirds of its bailout promises shows that Greece is broadly prepared to stick to the program, the German officials said. Improving tax collection and fighting corruption will win German backing, and getting a deal will depend on Greece’s overall reform pledges.

Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Tsipras’s coalition also might compromise on privatizations, one of the officials said. The officials asked not to be named because the deliberations are private and still in progress.

Greece wants a “a new contract” in which “ our commitments for primary fiscal balances will be included and continuation of reforms,” Tsipras told reporters after the EU summit. “This also obviously needs to include a technical solution for a writedown on the country’s debt, so the country has fiscal room to return to growth.”

Deadline Looms

Euro-area creditors have ruled out writing down Greece’s rescue debt while dangling the prospect of adjusting the repayment terms. Loan extensions and lower interest rates could make a sizeable dent in Greece’s long-term obligations if Greece can meet the required conditions, according to the Brussels-based Bruegel research group.

Greece and its partners are seeking a deal on financing to get beyond the bailout’s expiration at the end of February, keep Greek banks afloat, pay salaries and put the euro area’s most-indebted nation on a path to longer-term aid. Ultimately, Greece’s place in the 19-nation currency union is at stake.

An accord could pave the way for Greece to extend its rescue program and assure its financing by as soon as Monday, when finance chiefs resume talks in Brussels.

Shifting Tone

In a bid to restart work toward a solution, Tsipras also met Thursday with Dutch Finance Minister Jeroen Dijsselbloem, who heads meetings of his euro-region counterparts. The Greek side agreed to let a team of euro-area experts “engage with the Greek authorities to start work on a technical assessment of the common ground” on future financing, Dijsselbloem spokeswoman Simone Boitelle said in an e-mail.

The collegial conversation marked another shift in relations between euro-area officials and Tsipras’s government, which won last month’s election on a platform of ending austerity and easing Greece’s economic hardship.

Germany, the biggest country contributor to bailouts, has led calls for Greece to stick to its policy promises regardless of the change in government. France and Italy have been more sympathetic to Greek efforts to secure bridge financing while it works out a longer-term plan.

“The timeline is tight and I think the Greek prime minister is aware of that,” French President Francois Hollande said after the summit.

To contact the reporters on this story: Rebecca Christie in Brussels at [email protected]; Eleni Chrepa in Brussels at [email protected]

To contact the editors responsible for this story: Alan Crawford at [email protected] Tony Czuczka

More from Bloomberg.com

  • Gold Posts First Consecutive Gain in a Month on U.S. Outlook
  • U.K. Bonds Fall as German Growth Surprises; Pound Climbs in Week
  • Hollande Oversees Worst French 3-Year Growth Stretch Since WWII

FOREX-Euro dashes higher on reports of progress over Greece

* Euro gains in late NY trade after reports on Greece debt talks

* Euro hits 7-yr low vs British pound before Greek meetings

* Dollar at five-week high vs yen

* U.S. yields rise as Fed rate hike view strengthens (Updates with market reaction to reports of progress in EU/Greece talks)

By Gertrude Chavez-Dreyfuss and Daniel Bases

NEW YORK, Feb 11 (Reuters) – The euro advanced against the U.S. dollar late on Wednesday as conflicting reports emerged about progress between the European Union and Greece over a bailout deal due to expire at the end of the month.

Two official sources told Reuters that no deal has been reached, but that a common statement was being drafted that could leave it open for Greece to extend its current financing. A Greek official insisted there could be no extension of the deeply unpopular bailout.

Gains accrued to the euro after CNBC television, citing a source, reported an agreement was reached “in principle.”

The euro popped higher against the greenback, trading up to $ 1.1353 after the reports, from $ 1.2393. On the day, however, the euro added just 0.10 percent on the EBS trading platform .

“All we know now is that the worst case scenario, which had a low probability in the market is even lower now. Any potential worst case scenario is at least delayed,” said Sebastian Galy, senior currency strategist at Societe Generale in New York.

Luxembourg’s finance minister, Pierre Gramegna, later said the Eurogroup agreed on a way forward with Greece and that discussions would continue in the coming days.

Earlier, the euro hit a seven-year low against the British pound and was down versus the dollar before headlines started to emerge from the euro zone finance ministers’ meeting regarding Greece’s debt bailout program.

The euro ended Wednesday’s trade up 0.29 percent against the British pound at 74.36 pence after hitting its lowest in seven years.

Wednesday marked the start of tense talks between Greek Finance Minister Yanis Varoufakis and euro zone finance ministers. Greece’s new leftist-led government won a parliamentary confidence vote for its refusal to extend an international bailout.

The stepped up rhetoric ahead of the meeting had Varoufakis saying he was ready for a clash with euro zone officials over Greece’s decision to scrap austerity measures, end cooperation with various entities overseeing its bailout and demand a “haircut” for its debt burden.

On Tuesday the euro moved higher on optimism a compromise could be reached that was more acceptable to markets than Greece leaving the euro zone.

But it’s not all about Greece for the euro, which has moved within a 100-point range this week.

“Overstretched short positioning alongside what has been generally improving economic data out of the euro zone have put the breaks on downside momentum,” said Christopher Vecchio, a currency analyst at DailyFX.com, a division of FXCM in New York.

In other currency pairs, the dollar hit a five-week high against the yen, bolstered by a rise in Treasury yields. It rose 0.87 percent to 120.47 yen. Trade was thin, with Japanese markets closed for a public holiday.

The dollar was helped by a rise in the benchmark U.S. 10-year Treasury yield, which popped above 2 percent on Tuesday for the first time in a month on views the Federal Reserve might lift interest rates by mid-2015.

(Additional reporting by Anirban Nag in London; Editing by Jeffrey Benkoe)

Ireland’s Early IMF Pay-Off Gets Initial Euro-Area Approval

Euro-area finance ministers reached a provisional deal that would allow Ireland to make an early repayment of International Monetary Fund bailout loans.

The 18 national ministers, meeting in Milan today, said an early pay-off of most of the 22.5 billion euros ($ 29 billion) that the IMF lent Ireland as part of its 2010 rescue would help bolster the country’s recovery.

Ireland has “cleared the first hurdle” in its ambition to repay the loans early, Irish Finance Minister Michael Noonan told reporters after the meeting. “The object of the exercise is to make the Irish debt more sustainable.”

Having sought a 67.5 billion-euro bailout from the IMF and European Union countries in 2010 as borrowing costs surged and its budget deficit swelled, the country has since seen an acceleration of economic growth.

Today’s agreement would mean that euro-area countries waive the requirement stipulated in the terms of the bailout program that all creditors are repaid if one lender is paid back ahead of schedule. While Ireland seeks to pay back between 15 billion euros and 18 billion euros of the IMF portion of the rescue, it doesn’t want its other loans, received from the EU and from individual countries, to be affected.

“Over the next five years, if it’s approved and authorized, it will save us about 1.5 billion euros,” Irish Prime Minister Enda Kenny said in an interview with state-owned RTE Radio today.

Noonan said he hoped the 10 non euro-area finance ministers, who meet with their euro-area counterparts tomorrow, will also agree to the Irish plan.

Debt Sustainability

Early repayment will “strengthen Irish debt sustainability,” European Stability Mechanism chief Klaus Regling told reporters in Milan after the meeting. This would also “be to the benefit of other large creditors like” the ESM’s temporary predecessor, the European Financial Stability Facility, which helped fund the bailout.

The loans from the Washington-based IMF carried an effective 4.99 percent interest rate at the end of March, 1.93 percentage points more than the most expensive EU funds, according to the Irish finance ministry.

Noonan said in July that Ireland could save about 375 million euros a year refinancing 15 billion euros of its IMF loans at prevailing market rates. Ireland’s benchmark 10-year bond has fallen to 1.61 percent from a peak of over 14 percent in 2011.

Several countries including Germany must get formal approval from their national parliaments to allow an early repayment before they can take a final decision. It would then have to be signed off by euro-area finance ministry representatives.

To contact the reporter on this story: Ian Wishart in Milan at [email protected]

To contact the editors responsible for this story: Alan Crawford at [email protected] Zoe Schneeweiss, Patrick Henry

Euro zone business activity edges closer to 3-year peak

A nascent recovery in euro zone business activity continued on Wednesday with data managing to beat analysts’ expectations, despite slower growth in France and fears of falling prices weighing on sentiment.

Markit’s flash purchasing managers’ index (PMI) for April revealed that the euro zone’s composite index rose to 54.0, up from 53.1 in March. A reading above 50 marks an expansion in the private sector.

The data was driven by strong growth in Germany, with the composite number rising to 56.3 in April, from 54.3 in March. France saw slower growth in its private sector, but output rose for a second month with a figure of 50.5, down from March’s 51.8 reading. Output in the euro zone’s second-largest economy was hit by new orders in manufacturing, which stagnated after rising in March. This caused French firms to once again cut back on their staffing levels, according to Markit, the London-based research company that collates the data.

The data provided proof that French growth was still “fragile”, according to Howard Archer, an economist at IHS Global Insight. This was in marked contrast to the “robust” expansion he suggested the German numbers indicated.

The single currency rose to a session high of $ 1.3843 shortly after the data release. The euro (Exchange:EUR=) had started the session at $ 1.3806. European stock markets showed little change with earnings release in the tech sector continuing to weigh on investor sentiment.

Despite the softer data from France, the private sector in the euro area grew at its fastest in just under three years in April, with the bloc as a whole showing signs of a return to job creation.

“With backlogs of work rising, albeit only modestly, firms took on more staff in order to expand capacity. The increase in employment was the largest since September 2011, and only the second since 2011. Rates of job creation in both the manufacturing and service sectors were nevertheless only modest as many firms continued to focus on keeping costs low to boost competitiveness,” the company said in Wednesday’s release.

Read More QE from ECB? May not be the panacea many hope

Chris Williamson, Markit’s chief economist added that these PMIs mean that GDP (gross domestic product) for the euro zone is on course to rise by 0.5 percent in the second quarter, building on a 0.4 percent rise in the first quarter.

“Perhaps the best news came from the rest of the region, where the fastest rate of growth seen since early-2011 suggests that the recovery in the ‘periphery’ is gaining traction,” he said.

As well as the worse-than-expected French data, Williamson said the outlook for prices is a concern. The euro bloc has recently posted some weak growth in consumer prices and market watchers have warned against the threat of dwindling inflation and the possibility of deflation – where consumer prices start to fall.

Read More Portugal set for bond auction, first since bailout

The European Central Bank (ECB) has said that it is monitoring the situation and has hinted that it would be ready to act if this weakness continued. Williamson said that Markit’s data showed prices falling at their fastest pace since last August despite the upturn in activity.

“There will be growing fears that deflationary pressures are intensifying and that the ECB needs to respond with more than just words to the recent appreciation of the exchange rate,” he said.

More From CNBC

  • QE from ECB? May not be the panacea many hope
  • Portugal easily sells 750 million euros in 10-year bonds
  • Slovenia: No need to raise more cash in near-term

Spain PM says no decision taken on seeking bailout as bond interest rates stay … – Newser


Malaysia Star

Spain PM says no decision taken on seeking bailout as bond interest rates stay
Newser
6. The Treasury, however, must pay (EURO)53 billion ($65 billion) in bond redemptions before the end of the year, including a stiff (EURO)27 billion ($33 billion) in October. Spain is in its second recession in three years with an unemployment rate of
Interest rates up as Spain sells $3.8 bln in debtDaily Herald

all 772 news articles »

Asian stocks climb as ECB chief vows to save euro – San Francisco Chronicle


San Francisco Chronicle

Asian stocks climb as ECB chief vows to save euro
San Francisco Chronicle
Markets have been rattled this week by fears that Spain, the fourth-largest economy among the 17 that use the euro, could need a bailout along the lines of Greece, Ireland and Portugal because its borrowing rates are high. That would strain Europe's
Draghi promise to save euro triggers market rallyBoston.com

all 170 news articles »