Debt crisis: Euro rises on Greek bailout hopes despite uncertainty
THE Euro hit a fresh two-month high amid speculation that Greek politicians were ready to yield to the demands of their troika paymasters despite coalition leaders failing to sign off on tough austerity measures.
A meeting of Greece’s ruling coalition ended last night without an agreement, after the party leaders failed to sign off on pension cuts, one of the measures demanded to secure a €130bn bail-out .
Prime Minister Lucas Papademos was meeting with the troika - the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF) - in the early hours of this morning to try and resolve the pensions issue.
Greek news reports said the party leaders may meet again after that, and will come to an agreement later today, when eurozone finance ministers are due to meet.
The single currency yesterday rose to $1.3255, six cents higher than its low in January, as Mr Papademos, finally convened the three-times delayed meeting to approve the austerity measures.
The Athens talks had taken a farcical turn as officials blamed “lost paperwork” for delaying the deal needed to save the country from bankruptcy. There was a further postponement of several hours while the demands from the EU, ECB and IMF had to be translated from English into Greek for the sake of George Karatzaferis, the leader of the Right-wing Laos party.
Stockmarkets were not convinced Greece’s leaders could agree the measures; in Germany the Dax closed down 0.11pc, France’s CAC was off 0.02pc, and in London the FTSE?100 slid 0.27pc.
Mr Papademos was reportedly on Tuesday given a complex set of austerity and debt demands from the troika. Greece’s three coalition leaders were given six hours to read through the 50-page document, which included €3bn of spending cuts, pension reductions and 15,000 public sector job losses.
In a significant breakthrough, sources said the ECB, Greece’s biggest creditor, was prepared to participate in the debt restructuring by agreeing to hand back to Athens the profits on the Greek bonds it owns in a complicated debt swap.
James Nixon, at Societe Generale, said: “Given that the IMF have been widely reported to suggest that Greece needs at least an additional €15bn, it is clear that some form of official sector involvement is expected to fill the gap.”
Jean Claude Juncker, head of the Eurogroup, said the 17 eurozone finance ministers will meet today to discuss the deal, if Greek politicians approve it.
European leaders planned for the Eurogroup to pass the deal to the Greek parliament to vote on this weekend.
Unless the deal is voted through by parliament, Greece will not receive the international aid it requires to avoid defaulting on a €14.5bn bond on March 20.
Standard & Poor’s (S&P) piled on the pressure by warning that Greece’s debt is likely to be downgraded to “selective default” while negotiations drag on.
The rating agency added that even if private bondholders agreed to as much as a 70pc hit on their holdings, the move wouldn’t be “particularly significant” and Athens might need more.
Mark Rutte, the Dutch prime minister, said that a Greek exit from the single currency would be less risky now than it would have been in 2010. But Angela Merkel, the German chancellor, said: “I will have no part in forcing Greece out of the euro.”
Separately, the French cabinet officially approved plans to introduce a Financial Transactions Tax, paving the way for a 0.1pc levy on buying shares in French companies worth more than €1bn.