Greek debt swap plan sends Athens market soaring – business live
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Version 0 of 1. 7.12pm GMT19:12 Some late breaking news tonight... the European Central Bank is reportedly planning to play ‘hardball’ with Greece over its bailout. The FT’s ever-well-informed Brussels correspondent, Peter Spiegel, reckons the ECB will refuse Athens’ request for permission to borrow an extra €10bn to tide itself over while negotiations take place. He writes: The ECB is unwilling to approve the debt sale. It will not raise a €15bn ceiling on T-bill issuance by the requested €10bn, according two officials involved in the deliberations. “The Greek plan relies fully on the ECB,” said another eurozone official briefed on the talks. “The ECB will play hardball.” And that would leave Greece without any funding, when its bailout runs out on 28 February.... ECB set to veto Greece's t-Bill plan, essentially pulling rug out from under Syriza's plans, reports @SpiegelPeter http://t.co/Q9iCD2PruP Doubtless we’ll learn more tomorrow, when Yanis Varoufakis meets Mario Draghi..... GW 5.55pm GMT17:55 Greek deal hopes boost markets European shares have moved sharply higher after Greece unveiled a debt swap plan to end the standoff with its European creditors. The final scores showed: In the US, the Dow Jones Industrial Average is currently 171 points or 0.99% higher. On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow for When Varoufakis Met Draghi. 5.51pm GMT17:51 More from Renzi: 5.45pm GMT17:45 And here are Tsipras’s comments after his meeting with Renzi, courtesy of Reuters: Tsipras in Italy: "Greece is still a corrupt country .. and we will change that" #Greece pic.twitter.com/sYusYINEiN Updated at 5.52pm GMT 5.36pm GMT17:36 Italian prime minister Matteo Renzi said he believes common ground can be found between Greece and the rest of the EU. Here are Reuters snaps following Renzi’s meeting with Greek prime minister Alexis Tsipras: 5.13pm GMT17:13 Over in Greece, the country’s finance minister has been the focus of an extraordinary dressing down by Theodore Pangalos, the man who was deputy premier when Athens debt crisis erupted and who more than once has upset Europeans with his outbursts. Helena Smith reports: Yanis Varoufakis was accused of not only leading Greece to certain bankruptcy by pursuing an economic policy “that will fail resoundingly” but of committing the cardinal sin of behaving improperly while representing the country abroad. In unsparing language, the veteran politician, Theodore Pangalos, lashed out at the finance minister for his comportment, dress code and habit of keeping his hands in his pockets! “What I think is most annoying about the Greek finance minister is his rudeness which is displayed in different ways. First of all that he doesn’t tuck his shirt in. which is awful. Either you put it in or you don’t’ wear it. When you go to Downing Street you adjust your dress accordingly with that of your host. When everyone is wearing ties you don’t go with your slippers. The second thing is, he constantly has his hand in his pocket … it is extremely rude to keep your hand in your pocket and the third thing is he … never introduces any [other Greek ministers] to his counterparts,” he said. Pangalos, who held several ministerial posts, including foreign minister under former socialist Pasok administrations accused Varoufakis of paying more attention to his clothes than his job. “Is it possible that in a country, in which the government itself claims that two thirds of the population face poverty, the man responsible for [handling] those problems focuses solely on what he wears.” Greece’s new Syriza-led government was heading towards disaster, Pangalos railed. “This policy is going to fail resoundingly and Syriza will enforce its Plan B to which it has never admitted or accepted and that is none other than bankruptcy. I see the state not being able to pay what it owes, including wages and pensions and because it will have to pay something the drachma will come back.” Updated at 5.16pm GMT 4.50pm GMT16:50 More details of Greek finance Minister Yanis Varoufakis’ plans to meet German officials on Thursday, courtesy of Athens newspaper Kathimerini: [Varoufakis] said on Tuesday he would meet his German counterpart Wolfgang Schauble in Berlin on Thursday for talks on his country’s debt crisis. The minister announced the keenly-awaited encounter after meeting in Rome with his Italian counterpart. Varoufakis also confirmed he would meet ECB president Mario Draghi in Frankfurt on Wednesday. Germany is seen as the strongest opponent of any easing in the terms of the massive debts Greece has built up as a result of a series of international bailouts in the wake of the global financial crisis. Quite a contrast in styles in prospect: Updated at 4.57pm GMT 4.35pm GMT16:35 Greek prime minister Alexis Tsipras has tweeted a picture of his meeting with his Italian counterpart Matteo Renzi: Συνάντηση αυτή την ώρα με τον ιταλό πρωθυπουργό κ. @matteorenzi. #Greece #Italy pic.twitter.com/GjrFrPs9GL 4.25pm GMT16:25 Meanwhile GERMAN TWO-YEAR YIELD FALLS TO -0.201%, BELOW ECB DEPOSIT RATE. means ECB can no longer buy it without incurring a loss 3.42pm GMT15:42 Greek markets stay buoyant; stocks end the day up 11.27%. Sentiment changed after new Fin Min seemed to back away from debt write-down. 3.39pm GMT15:39 That’s it! The Athens stock market has just closed, and a day of fevered buying has driven the main index up over 11%. That’s despite the MNI newswire reporting that the European Central Bank will not accept the debt swap proposed by Yanis Yaroufakis (see earlier post for details). Clearly there’s optimism that a deal can be hammered out..... #Greece Athens market ends a jubilant session up 11.3%, banks +18%. Everyone craves for a deal with the Eurozone. 3.17pm GMT15:17 Italy: Greece needs growth Unfortunately, the Greek-Italian talks weren’t broadcast (or at least I couldn’t find them), so here’s Reuters’ take: Italian Economy Minister Pier Carlo Padoan said on Tuesday that Greece needs to achieve strong economic growth through structural reforms in order to put its public debt on a sustainable path. “Attention to growth is paramount to guarantee the sustainability of Greece’s debt,” Padoan said in a statement after meeting with Greek Finance Minister Yanis Varoufakis. Varoufakis is meeting his European counterparts this week to present the proposals of Greece’s new government which wants to re-negotiate its public debt repayments and roll back austerity policies. Varoufakis told reporters his meeting with Padoan had been “useful and constructive” and had addressed “all the main parameters for financial stability in the euro zone.” He added that he would meet the European Central Bank on Wednesday and travel to Berlin on Thursday. [end] One could suggest that Italy could also use a spot of growth, having contracted or stagnated for most of the last three years... Updated at 3.27pm GMT 2.57pm GMT14:57 2.50pm GMT14:50 Italy’s finance minister is pushing Greece on reforms and growth: Updated at 2.50pm GMT 2.48pm GMT14:48 Newsflashes from Rome, following the talks between the Italian government and Greece’s anti-austerity roadshow: 2.39pm GMT14:39 MNI: ECB opposed to bond swap plan There’s a rumour sweeping the City that the European Central Bank will not accept Greece’s bond swap proposal (for the ECB to exchange its existing Greek debt for new ‘perpetual bonds’). That’s via the MNI newswire. Of course. Daft idea always a non-starter. RT @YanniKouts: #ECB won't accept bond sawp, wants full repayment ~source /via @fxmacro ECB will not accept Greece bond swap proposal. Of course that doesn't mean that a negotiated compromise is not possible. Seen it many times Updated at 3.19pm GMT 2.37pm GMT14:37 Greek FinMin Varoufakis Says To Meet ECB’s Draghi At 8:30 GMT In Frankfurt 2.35pm GMT14:35 Greek deal optimism, and the surprise interest rate cut by Australia overnight, are cheering traders in New York. Wall Street just opened, and the Dow Jones index has followed Europe’s lead by rallying almost 1%. Dow opens up 130 points on oil boost, Greece news » http://t.co/82jdged8Kg pic.twitter.com/rE0BmSa4Ys 2.01pm GMT14:01 The euro is also rallying today, up almost 1% or over a cent to $1.144 against the US dollar. 1.46pm GMT13:46 Higher still, and higher, goes the Greek stock market.... Greek stock market up 11% - buoyed up by indications that new Greek government is backing off seeking an explicit write down of its debt. 1.28pm GMT13:28 The BBC’s Linda Yueh explains why Varoufakis’s meeting in Frankfurt with Mario Draghi tomorrow is crucial: Greek Finance Minister headed to #ECB tomorrow. If Merkel believes talks will take months, then Varoufakis needs to secure ECB agt on banks. 1.27pm GMT13:27 1.19pm GMT13:19 Greek finance minister Yanis Varoufakis is looking terribly smooth at the start of his talks in Italy -- no bright-blue shirt or thigh-length coat this time.... Updated at 1.24pm GMT 1.10pm GMT13:10 Merkel: Greek talks will drag on.... Angela Merkel, the German chancellor, has predicted that the Greek negotiations will last for months. Speaking at a news conference in Berlin, she also declined to comment on the new debt swap proposal: “It is clear that the Greek government is still working on its position - that is more than understandable if you look at how few days this government has been in office. “We are waiting for proposals and then we will enter talks ... I don’t want to comment individually on all the details that are being disseminated.” German Chancellor Merkel says she expects Greek funding talks to drag on for months. $EURUSD 1.02pm GMT13:02 The Athens rally is picking up fresh momentum.... The Greek stock market is having a gigantic day. Now up over 10%. pic.twitter.com/TbnQNY9BpO 1.00pm GMT13:00 Yaroufakis to meet Draghi and Schäuble Newsflash from Italy -- Greece’s finance minister has announced that he will see the president of the European Central Bank, Mario Draghi, on Wednesday. And then German finance minister Wolfgang Schäuble on Thursday. Their reaction to Greece’s debt swap proposal will be crucial.... +++ Greek minister Varoufakis to @la_stampa: I will meet Mario Draghi tomorrow, Schaeuble thursday +++ Reminder, Yanis Varoufakis should be meeting Italy’s finance minister, Pier Carlo Padoan, shortly in Rome..... 12.32pm GMT12:32 Lunchtime Summary: Greek debt plan sends markets soaring A quick recap: Greek bonds and stock have surged this morning on hopes of a breakthrough between Athens and its official creditors. The Athens stock market is up almost 8%, as investor confidence rallied. National Bank of Greece is up almost 23%. And Greek bond yields have tumbled, as default fears receded. The yield on Greek 10-year bonds has fallen by more than one percent, a big move, from 11.4% to 10.2%. The trigger for the rally came last night, after finance minister Yanis Varoufakis told City investors that he hopes to swap some existing debt for new bonds linked to Greek growth (as Germany received in 1953). He also suggests that the ECB’s holdings could be changed for new ‘perpetual bonds’ - yielding a coupon, but never to be repaid. Full details here. Donald Kohn, a member of the Bank of England’s Financial Policy Committee, has predicted that a deal will be agreed. But another BoE policymaker, Martin Taylor, warned that Greece’s creditors need to realise they will not get all their money back. European markets are all up today, pushing towards their highest level in seven years. Analysts believe Alexis Tsipras’s new government is showing a more conciliatory attitude; Hugo Dixon of Breaking Views reckons the risks of Grexit have receded to 20%. Ranko Berich, head of market analysis at Monex Europe, says Varoufakis is walking a tightrope. ”Swapping national debt for growth-linked bonds is indeed a way to ease austerity, but it falls short of the haircuts that are likely to be blocked by key creditors. As Greece’s creditors chew the idea over, the clock is ticking on the nation’s fiscal situation and the health of its banks.” And there’s still a risk that the European Central Bank could pull its support for the Greek banking sector if there isn’t a deal by the end of February, when the current bailout expires. Three Greek banks have already sought emergency liquidity assistance from the ECB, it emerged today, showing tensions building in the system. Berich explains: The ECB has a tough, rather politicised choice to make if it continues to provide liquidity past this point Equally, the Greek government itself must find the funds to continue to function on a short term basis, and has asked for permission from the Troika to issue extra short term debt. Should the ECB or the Troika take a hard line on either of Greece’s critical short term needs, a rapid collapse in the Greek banking sector or even the government’s fiscal position remains a worrying possibility.” Varoufakis has personally denied that the new government has ditched its plans; he pledges that his plan will ease Greece’s debt burden. @PaulGambles2 Our promise = solid. Debt will be rendered sustainable, even if we replace haircut with euphemisms & swaps. No U-turn! There’s also excitement in Athens that the Troika could soon be abolished. 12.27pm GMT12:27 Back in parliament, Bank of England policymaker Martin Taylor has warned that Greece’s debt is unsustainable and creditors are wrong to believe they can get all their money back. Martin Taylor, who sits on the Bank’s Financial Policy Committee, told MPs that Germany needs to rethink its position. Reuters has the details: “It looks to me to be unsustainable,” Taylor told Britain’s parliament when asked about Greece’s debt. “If the creditor nations really do believe they are going to get their money back, we are in an even worse situation than I think we are,” Taylor told parliament’s Treasury Select Committee. One of the “tragedies of the European situation” was that Germany was split between being pro-European at all times, and the need for monetary and financial rigour at all times, Taylor said. “When these come into conflict, the easiest way to resolve it is to claim that monetary and financial rigour is pro-European,” Taylor said. “This conflict needs to be laid bare ... and one just hopes that Germany will come to a coherent solution and I am sure they will,” Taylor, a former senior banker, added. 12.18pm GMT12:18 While we’re collecting internet humour.... Why Syriza people don't wear ties pic.twitter.com/fvTa1Z1Nc1 11.58am GMT11:58 That Yanis Varoufakis/Steve McQueen meme is gathering speed: .@yanisvaroufakis stars in The Great Escape (h/t @econhedge @NickMalkoutzis @FT) #Greece pic.twitter.com/WekSMucbHZ Hat-tip to General Boles and his military-class Photoshop skills. 11.51am GMT11:51 MT @Stavzilla: Neoliberalism just isn't logical, Captain #SYRIZA #Tsipras #Varoufakis @paulmasonnews @Frances_Coppola pic.twitter.com/OdYthqpaZ8 11.42am GMT11:42 Elsewhere in the eurozone...Irish growth rates will be not as strong this year compared to 2014, according to Moody’s Investors Service. Moodys predict Ireland’s economy will grow by 3.8% in 2015 which down from GDP growth rates for last year. In 2014 real GDP growth was estimated at around 5%. But the global ratings agency said the rate was “still a very solid performance” for the Republic compared to other EU economies. Irish economic growth will continue to rise in 2016 - the year of the next general election in the Republic - by 3% despite underperforming banks and a still huge national debt. (via Henry McDonald) Updated at 11.56am GMT 11.37am GMT11:37 Yanis Varoufakis is expected to meet Italian finance minister Pier Carlo Padoan around 2pm today, to push his debt swap plan. Another chance for Varoufakis to cement his growing reputation as Europe’s coolest politician. As Helena Smith reported last weekend, he’s made quite a splash: Yanis Varoufakis was forced to battle his way past high-school girls wielding mobile phones when he turned up for his first day at work. And that’s not because the shaven-head economics professor likes to blog, or knows a thing or two about poetry, which he is prone to deliver with a rare panache. At 53, the Greek Australian takes his pecs seriously. Indeed, the real talk of the town, as it enters this most critical of times, is the pop star appeal of the man who will come face-to-face with creditors at the negotiating table. More here: Barricades down, ties off: welcome to Greece’s style revolution There was also excitement in Athens after Varoufakis arrived at the prime minister’s office on a giant 1300cc Yamaha motorbike. Very Steve McQueen-esque.... Athens plots a daring escape from the troika http://t.co/LfVdYmlpY2 via @FT. Every great escape needs a hero on a motorbike #Greece Greek prime minister Alexis Tsipras is also visiting Italy today, due to meet with Matteo Renzi around 5pm local time (4pm GMT). 11.18am GMT11:18 Bank of England policymaker predicts Greek deal Donald Kohn, a member of the Bank of England’s Financial Policy Committee, has forecast that a deal over Greece’s debt will be hammered out. Kohn told MPs on parliament’s Treasury committee this morning that the two sides are inching closer: “My expectation is that Greece and the euro zone members and the IMF will work together for an agreement,” “We have heard some language in the last day or two that suggests a little bit of progress, a little bit of give.” 11.00am GMT11:00 Hugo Dixon of Breaking Views argues that Greece’s new government has made some important concessions over its debts, that limit the risk of exiting the eurozone. He laid it out in this small ‘tweetstorm’: 1 #Tsipras somersault - aka #kolotoumba - has started. I'm cutting #Grexit chance from 30% to 20%. @yanisVaroufakis made 4 concessions in FT 2 @yanisvaroufakis said Greece was seeking €1.9bn in new cash. Previous line was Greece didn't want any new money 3 @yanisvaroufakis said would maintain 1-1.5% primary surplus even if that meant govt couldn't fulfil all promises on which elected 4 Greek fin min also talked about new "bridging programme". Previously Syriza was insisting it didn't want a programme, MOU or whatever 5 @yanisvaroufakis says not looking to haircut debt but instead have series of debt swaps 6 More #kolotoumba still needed. Pressing need is for Greece to ask for extension of current programme so risk to banking system is removed 10.49am GMT10:49 Greek stock market surges 7.5% The Greek stock market has surged by 7.5% today, as Athens investors give a thumbs-up to the debt swap plan devised by Yanis Varoufakis. It has now recovered most of its losses since the general election: Bank shares continue to lead the way: So, plenty of optimism around that the two sides will resolve the issue amicably, even though we’ve not heard anything official from Germany or the European Central Bank about this plan. 10.30am GMT10:30 Reports on the wires that three Greek banks have accessed the emergency funding available from the European Central Bank. #Greece | THREE GREEK BANKS HAVE STARTED USING GREEK CENTRAL BANK'S EMERGENCY FUNDING (ELA) WINDOW, TAPPED ABOUT 2 BLN EUROS SO FAR- SOURCES That’s not a reason for panic. The ELA window is there to provide emergency liquidity assistance, to help banks who cannot access funds in the wholesale market. Overseas banks have been cutting their exposure to Greece in recent weeks, leaving its lenders at risk of a liquidity squeeze as some savers cut their deposits. 10.24am GMT10:24 Athens thrilled by "Death of the Troika" There is much excitement in Athens today over reports that plans are afoot to dismantle the deeply unpopular “troika” of auditors from the EU, ECB and IMF. Helena Smith reports: Senior officials are telling me it would be “an undoubted victory” for a government otherwise facing a brick wall when it comes to demands for debt reduction and austerity cancellation. Following murmurings by the EU commission president Jean-Claude Juncker that Europe would be better off without the institution, the German business daily, Handelsblatt, reported this morning that the European Central Bank thinks it might not be a bad idea either. The paper quotes a German government source as saying “the ECB will use the chance to exit.” There is growing speculation – mooted by Handelsblatt – that the Washington-based IMF is also considering following suit. Athens’ new Syriza-led government has not wasted any time telling anyone who will listen that it will not be doing business with a mechanism the radical leftists have long argued is, first and foremost, undemocratically elected. One insider says: “It seems that they are coming round to the realization that the troika has to go.” “It was very humiliating having these men fly in every three months [to monitor economic progress] like we were some colony.” But Germany is still standing its ground with spokespeople for chancellor Angela Merkel and finance minister Wolfgang Schauble both ruling out the abolition of the inspectorate. “The German government sees no reason to scrap this mechanism of evaluation … and we also see no indications that the European Union is distancing itself from this evaluation process,” the chancellor’s spokeswoman Christiane Wirtz said. We first reported Alexis Tsipras’ reaction to the news late last night. Update: The IMF currently has a permanent representative stationed in Athens. But the Greek government has stated it’s willing to sacrifice the €7.2bn troika funding still outstanding (the tranche was held over amid disagreement over the country implementing further austerity) rather than subject itself to further inspection by the institution, Helena adds. Updated at 11.55am GMT 10.17am GMT10:17 The rally in Greek bonds has driven the yield on its 10-year debt down to 10.3%, from 11.4% last night. 9.50am GMT09:50 The BBC’s Gavin Hewitt sums it up: Markets less nervous about Greece. Gk Fin Min seems to be backing away from debt haircut and proposing new bonds so protecting investors. Updated at 10.06am GMT 9.35am GMT09:35 Just in. Britain’s construction sector grew faster than expected in January, as confidence rose and new orders picked up. Markit’s monthly construction PMI rose to 59.1 in January, having hit a 17-month low of 57.6 in December (any reading over 50 shows growth) Fears that Britain’s builders were suffering a slowdown should be allayed, says Markit. Firms reported that sub-contractors were particularly hard to find last month, pushing up their charges to a near record-high. David Noble, CEO at the Chartered Institute of Procurement & Supply, says construction made a ‘perky’ start to 2015, although hiring slowed down: “New orders were up, but staffing levels have yet to catch-up showing at their lowest level of growth for 13 months, which may slow down activity as companies struggle to keep up with new demand. With supply chains under pressure, supply shortages, longer delivery times and a sharp fall in the performance of suppliers, there may still be challenges ahead. Updated at 12.32pm GMT 9.29am GMT09:29 The FTSE 100 has now risen by 1.3%, gaining 93 points to 6875 points as Greek anxieties continue to ebb. European #stocks have extended gains after Wall Street rebounded yesterday. Receding fears over Greece & ECB's QE also providng support ^FR Australia’s overnight interest rate cut is also boosting sentiment, as it should help the resource sector. BHP Billiton, the Anglo-Australian mining, metals and petroleum company, has jumped 5%. 9.17am GMT09:17 1953 and all that.... Greece’s proposal to link debt repayments to the future health of its economy has been seen before in Europe. After the second world war, when Germany succesfully negotiated a debt restructuring that set it on the path for recovery. Jeremy Cook, chief economist of currency exchange firm World First, says there’s a clear comparison: Germany had to operate a current account surplus, i.e. exporting more than it imported, by around 3% for them to start paying off the loans. This encouraged other countries to purchase German exports and allowed them to rebuild a manufacturing industry that was crippled as part of the conflict. The benefits are clear to see now. Germany also had around 50% of its outstanding debt written off, that looks unlikely to happen in this instance. So rather than a climbdown, it’s a logical move by Athens, Cook suggests. This is only the beginning of the solution however; nobody has accepted these plans as yet but there is a lot less within this plan to get overtly angry about. For the full story of 1953 London Agreement, check out this piece: A new idea steals across Europe – should Greece’s debt be forgiven? 8.49am GMT08:49 Yanis Varoufakis is continuing his tour of Europe today, visiting Rome to meet Italy’s finance minister, Pier Carlo Padoan, and Prime Minister Matteo Renzi. Fingers crossed for another fashion triumph.... Updated at 8.49am GMT 8.45am GMT08:45 German bond yields fall below Japan Money continues to flow into German debt this morning, even though the bonds are already extremely expensive. This has pushed the interest rate on bunds below the equivalent Japanese bond, for the first time ever. German 10-year bond yields - the euro zone benchmark - opened lower than Japan's for 1st time: 0.31% versus 0.36% #deflation 8.41am GMT08:41 Greece’s stock market is also rallying this morning, led by bank shares: #Greece Athens surges now +4.47%, banks +8.81% Updated at 8.45am GMT 8.38am GMT08:38 Greece’s three-year bond continues to jump in value, pushing down its yield to 16.64% from 19.84% last night. Another sign that default fears are easing.... 8.32am GMT08:32 City analysts are more hopeful today that Greece will avoid a confrontation with its partners that leads to its exit from the eurozone. Michael Hewson of CMC Markets explains: While the initial debt swap proposals could well run into obstacles with respect to EU rules about monetary financing the fact that a new approach is being tried has to be welcome given how much of a disaster the current bailout program has been. The key question now is whether EU leaders and in particular the ones in Berlin, as well as the ECB are prepared to give the new proposals a decent hearing over the next few weeks as the proposals are fleshed out, or whether they get dismissed. Significance of Greek plan is showing what they'll compromise on: reform rather than write down debt, run a surplus, drop some of programme. 8.31am GMT08:31 European shares rally on Greek hopes European stock markets have all risen this morning, driven by hopes that Greece’s creditors would agree to the debt swap proposal. In London the FTSE 100 has jumped 60 points, or nearly 1%. Mining stocks, which would suffer badly from an economic slowdown, are leading the risers. 8.23am GMT08:23 Greek bonds are continuing to strengthen, lowering the yield on its three-year, five-year and 10-year debt. But all three bonds still have an effective interest rate over 10%, or 18% for the three-year bonds, showing that investors are pricing in a significant default risk. GREECE 10-yr 10.455 -49.5 5-yr 14.68 -53 3-yr 18.17 -1.435 Updated at 8.24am GMT 8.14am GMT08:14 Greece has asked for permission to issue €10bn in additional short-term bonds (or treasury bills) to cover the funding gap while it hammers out a new deal with its creditors. The Kathimerini newspaper has the story: According to a high-ranking official in Brussels who declined to be named, the request was submitted in Paris by Finance Minister Yanis Varoufakis to French counterpart Michel Sapin and European Commissioner for Economic and Monetary Affairs Pierre Moscovici. Greece can currently issue a maximum of 15 billion euros in T-bills, a limit it has already reached. Varoufakis asked for the ceiling to be raised to 25 billion euros so that Greece can cover its needs during a “bridge agreement” ahead of a final settlement between the eurozone and Athens. Now, this might be a little awkward - given the new Greek government’s blunt comments about its lenders. It’s also not clear who’ll buy this extra debt: #Greece aims to cover funding gap by issuing €10bn worth of T-bills. Who's going to buy them though? Banks don't have that cash. Syriza said would refuse to talk to Troika, now begging Troika to allow extra EUR10trn of T-bill issuance http://t.co/JLVX16yvFH 8.08am GMT08:08 Overnight, the Reserve Bank of Australia became the latest central bank to ease monetary policy in response to weakening growth and deflation fears, as my colleagues in Australia live-blogged here: Dollar dives, shares soar as Reserve Bank cuts interest rate to 2.25% – as it happened 8.03am GMT08:03 The Greek government has insisted overnight that it “will not back down” from seeking a cut in its overall debt burden. Athens appears to be stung by reports that it had dropped the plan altogether. Finance Minister Yanis Varoufakis confirmed that Greece hopes to use “financial mechanical tools” (ie, the debt swap explained earlier), but also claimed that some of his comments to City investors had been ‘misinterpreted’. Varoufakis added: “The essence is the same. Greek debt will become viable and will open up prospects for real growth and the Greek people will finally be able to breathe.” Updated at 8.05am GMT 7.52am GMT07:52 Greek bonds have strengthened in value a little this morning, as investors react to the new debt swap plan. But yields (the interest rate on the loans) remain painfully high. The yield on the 10-year Greek bond has dropped to 11.2%, from 11.4% yesterday, still deep in the ‘danger zone’ where a country can’t finance itself. 7.47am GMT07:47 Introduction: Greece proposes debt swap Good morning, and welcome to our rolling coverage of the Greek debt negotiations, and other events across the world economy, finance and business. There’s a sense of calm in the markets this morning after the new Greek government laid out its plan to renegotiate its some of its debt pile. And it’s a more nuanced stance than some expected; Athens is asking for “menu of debt swaps” to give it time and space to recover. That includes: 1) Growth Bonds, which would be linked to Greece’s nominal economic growth. They would replace some of the debt held by European partners, who would only be paid if the Greek economy was growing. 2) Perpetual Bonds, to replace the debt currently held by the European Central Bank. Finance minister Yanis Varoufakis, who outlined the plan to City investors yesterday, is dubbing the plan “smart debt engineering”. It won’t actually involve a headline cut to Greece’s debt, simply lift some of the burden of repaying it. Bloomberg TV, though, are calling it the Greek Retreat – as it’s not the debt forgiveness that some voters hoped to see. If Athens got a deal, it would still commit to running a primary surplus and also implement some reforms. Tuesday's FT front page: Greek finance minister unveils bid to end stand-off with creditors #tomorrowspaperstoday pic.twitter.com/4uG7U8Lbvc Varoufakis told the Financial Times that he hopes Greece’s European partners will back the plan. “I’ll say, ‘Help us to reform our country and give us some fiscal space to do this, otherwise we shall continue to suffocate and become a deformed rather than a reformed Greece’.” But will they bite? European leaders still fear that offering Greece more help will spark a flurry of requests from other countries being dragged back by austerity. And the ECB may feel that this kind of debt swap would break its rules banning monetary financing of a member state. But for now, investors are little more hopeful that the Greek drama won’t blow up into a major crisis. Ian Williams of Peel Hunt explains: There was encouragement late yesterday as the new finance minister seemed to climb down from initial demands for debt write-offs, proposing instead a bond swap arrangement; the details have yet to emerge. I’ll be tracking all the reaction, and other developments, though the day.... Updated at 11.03am GMT |