Stocks and euro gain on rising hopes of Greek debt deal
Published 18/02/2012 | 05:00
WORLD stocks hit a six-and-a- half-month high and the euro gained yesterday on hopes that Greece will seal a long-awaited bailout deal next week.
Prices of US and German government bonds fell and Italian and Spanish debt yields dropped as optimism that Greece would be able to avert a disorderly default curbed a 'flight to safety'.
Greece edged closer yesterday to winning a new rescue package as officials said Germany was optimistic a deal could be struck when eurozone finance ministers meet on Monday.
Equities in Europe hit a more than six-month high on the outlook for a Greek debt deal and shares of eurozone banks rose.
"I think we'll get this Greek deal and the euro will edge higher. But Greece is clearly not out of the woods and its problems will be revisited many times in coming months," said Paul Robson, strategist at RBS.
Meanwhile, a €130bn bail-out of Greece will contain unprecedented controls on Athens' ability to spend funds, officials said.
The agreement, which officials hope to finalise on Monday, is likely to include an escrow account that must always contain enough cash to pay Greece's debt for nine to 12 months. If the account falls below that level, money will be taken from funds earmarked to run the Greek government, according to people briefed on the talks.
In addition, the bailout will include a permanent and beefed-up presence of international monitors who will attempt to keep real-time tabs on the Greek government's spending decisions, officials said.
The ECB has also secured protection against forced losses on its Greek government bonds in a move that should make it easier for profits on its holdings to be put towards Greece's second bailout.
The ECB's Greek bonds, bought for €40bn, will be exchanged for new bonds exempt from any legal action by Athens to impose losses. Such protection was seen by the ECB as essential if it was to co-operate with the complex choreography behind the eurozone's official rescue plan for Greece. It could also trigger legal action by other Greek bondholders arguing the ECB has received unfair treatment. (Reuters)