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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.30) and Nick Fletcher

Greece: Eurogroup says debt talks on the table, troika to return to Athens –as it happened

A Greek national flag atop the archaeological site of the Athens Acropolis.
A Greek national flag atop the archaeological site of the Athens Acropolis. Photograph: Alkis Konstantinidis/Reuters

Summary: creditors to return to Greece, debt relief talks on table

The Eurogroup has said debt relief talks for Greece are on the table, but are dependent on the necessary reforms to tax and pensions. More work is needed, and the Eurogroup called on the institutions and the Greek government to put extra effort in to reach agreement.

Representatives of the creditors - the troika - will return to Athens tomorrow, but the process needs to be speeded up, so the debt relief talks will be brought forward.

On that note it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

Klaus Regling, head of the eurozone rescue fund the ESM, said Greek liquidity was getting tighter but:

Will the debt issue be part of the first review?

Dijsselbloem: The review is on the implementation of what was agreed so debt relief not part of that. But there is a strong link between the two. We have agreed there should be fiscal targets and pension reform, so fiscal sustainability long term will be part of debt discussions.

[To bring them together} we need to speed up review process and bring forward debt discussion, which could allow us to reach political agreement.

Was there discussion about debt relief today?

Dijsselbloem: We did not, but I flagged to my colleagues that discussions about debt relief would need to come in the short term future. As soon as we know the outcome on reforms and tax etc then we know what the remaining issue of debt relief will be.

And after a final question on Portugal the press conference ends.

Updated

The review was said to be completed by Easter but that is not straightforward:

IMF have asked for more to be done, and also made strong debt relief case, are you in that camp now?

Dijsselbloem: Have to be more on table than there is now or it will not work. Not in any camp but there is a link between depth of reforms and any remaining debt issue. More you do on reform, smaller fiscal gaps will be and less of a debt issue there will be in the future.

We will put pressure on all sides to make sure it adds up, as IMF says.

Questions: Could debt talks start before completion of review?

Dijsselbloem: Need to know the outcome of the reforms, but there is going to be a point where all this comes together.

On other matters, the Eurogroup says Italy’s high debt burden remains a concern.

European Economic and Monetary Affairs Commissioner Pierre Moscovici said he was very happy with the agreement.

It would allow the mission chiefs (the creditors’ representatives) to go to Athens as soon as tomorrow to lead discussions on a review of the agreement.

He said there were five issues in particular:

  • establish a privatisation fund;
  • reform income tax;
  • reform pensions;
  • create independent revenue agency;
  • cope with non-performing loans.

He said they would work with Greece on steps to achieve a 3.5% primary surplus in 2018.

Updated

Greece: more work needs to be done, debt discussions will be on table - Dijsselbloem

The troika will return to Athens, confirms Jeroen Dijsselbloem, head of the Eurogroup at a press conference following today’s meeting.

But he said more effort needed to be put in to get a good outcome, and there were still fiscal gaps to be filled and some reforms needed to be deepened.

He called on the institutions (the creditors) and in particular the Greek government to put in the extra effort.

On debt, they had said if the Greek government delivered a primary surplus “we would do what was necessary to make [the] debt manageable.”

He said they had now made explicit that those discussions would be on the table.

Updated

Here’s European Commission vice presdient Valdis Dombrovskis on the situation with Greece:

European markets edge lower but off worst levels

A rebound in oil - above $40 a barrel for the first time since December - and metal prices - iron ore in particular - has lifted commodity companies and helped leading shares in Europe recover some of their early losses. Markets ended mostly lower, hit by gloomy comments from the Bank of International Settlements and some profit taking ahead of the European Central Bank’s interest rate-setting meeting this week. But the strength in commodities and a rally on Wall Street after an early dip helped European markets to recover some ground. The final scores showed:

  • The FTSE 100 finished down 17.03 points or 0.27% at 6182.40 having earlier fallen as low as 6125
  • Germany’s Dax dipped 0.46% to 9778.93
  • France’s Cac closed down 0.32% at 4442.29
  • Italy’s FTSE MIB fell 1.2% to 18,059.27
  • Spain’s Ibex ended down 0.28% at 8786.8
  • But in Greece, the Athens market added 1.19% to 559.44

On Wall Street, the Dow Jones Industrial Average is currently up 57 points or 0.34%.

Cyprus exits bailout programme

Cyprus has exited its bailout programme ahead of schedule, and here’s a statement from the managing director of the International Monetary Fund Christine Lagarde:

Updated

Greece - debt relief talks could start in April

More on the prospect of talks over debt relief for Greece. Reuters reports:

The head of the Eurogroup Jeroen Dijsselbloem asked euro zone finance ministers meeting on Monday to prepare to start talks on debt relief for Greece in April, a euro zone official said.

Talks on the debt relief can only start once Greece’s lenders -- euro zone governments and the International Monetary Fund -- agree that the country has delivered on reforms pledged in August in exchange for cheap loans.

This reform assessment, called the first review, stalled in February over details of the politically very difficult pension reform and because of diverging views between the euro zone and the IMF on how to make the economy and debt sustainable in the longer term.

Moscovici
Moscovici Photograph: Laurent Dubrule/EPA

European Economic and Monetary Affairs Commissioner Pierre Moscovici told reporters before the ministerial meeting he expected the ministers to decide on Monday to send the reform review team back to Greece.

German Finance Minister Wolfgang Schaeuble said he would support sending the team already this week. Two euro zone officials, who asked not to be named, said the lenders’ representatives may set out already on Tuesday.

“The lenders mission will return to Athens on Tuesday,” a Greek government official said.

Updated

Confirmation from Germany that Greece’s creditors could return to Athens this week:

Oil hits $40 a barrel

Brent crude has hit $40 a barrel for the first time since early December.

The move comes on hopes of continuing economic recovery in China, which set a target of 6.5% to 7% growth this year, which has boosted commodity prices generally.

On top of that US data from information firm Genscape showed a lower than expected increase in stocks at the Cushing delivery hub in Oklahoma, at the same time as hopes are growing that producers could act to tackle the problem of oversupply.

Updated

Back with Greece and reports are coming in that the country’s international creditors will return to Athens on Tuesday, according to a Greek government official.

And Reuters is quoting a eurozone official saying that ministers were told to prepare for the start of talks on debt relief for Greece in April.

Updated

Wall Street opens lower

Meanwhile US markets have continued the downward trend being seen elsewhere.

After last week’s rally investors have decided to cash in some of their gains ahead of the European Central Bank meeting on Thursday, when further interest rate cuts or other stimulus measures are expected. There is scope for disappointment here, however, as ECB president Mario Draghi tries to live up to his promises of taking all necessary action.

The earlier gloomy report from the Bank of International Settlements, warning of a “gathering storm” for the global economy, is not helping sentiment.

So the Dow Jones Industrial Average has slipped 33 points or 0.19, while at the open the S&P 500 is down 0.45% and Nasdaq 0.56% lower.

Greece’s finance minister has urged its creditors to return to Athens and finish signing off its bailout review.

Euclid Tsakalotos told the Frankfurter Allgemeine Zeitung newspaper that the two sides can’t simply keep arguing over pension reforms forever. He wants the institutions to accept Greece’s position, opening the door for talks on debt relief.

Tsakalotos said:

“This question of time is important if we want to move from a vicious to a virtuous circle.

We can’t continue debating over pension reforms forever, as if to keep a wound open.....Pensions are part of the social safety net.”

More here: Greece urges completion of reform review by May 1

Eurogroup chief: We must stick to the Greek bailout deal

Jeroen Dijsselbloem arriving at the Eurogroup meeting today
Jeroen Dijsselbloem arriving at the Eurogroup meeting today Photograph: EbS

Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, has warned Greece that it must stick to its bailout deal.

Arriving at today’s eurogroup meeting in Brussels, Dijsselbloem said ministers would listen to “the institutions” - Greece’s lenders - and see how all sides can move forward..

But he insists that Greece cannot wriggle out of making the pension reforms demanded by creditors, saying:

We need credible and sustainable pension reforms and the budget needs to be on track for the medium-term.

This is not just something that concerns the IMF, it is something that concerns all the institutions and the eurogroup.

We need to stick to the agreement that we had this summer.

Dijsselbloem adds that he hopes to hear more details today about how pension reforms will work out.

Those reforms are hugely unpopular in Greece, where farmers have been holding protests against pension cuts for months.

Pierre Moscovici, EC commissioner for economic affair, is also speaking to the press.

He hopes that the eurogroup will take a ‘unanimous decision’ that the mission chiefs representing Greece’s creditors should return to Athens ASAP to conclude the current bailout review (which has been bogged down for months).

Updated

Oil is also rising today, with Brent crude gaining over 1% to $39.50.

Shares in Brazil mining group Vale have leapt by 8%, following the massive rally in iron ore this morning.

Eurozone finance ministers should be arriving at EU headquarters shortly, for a regular eurogroup meeting.

They’ll be playing second-fiddle to the big EU Migration Summit, where leaders are wrangling over the refugee crisis.

But the meeting could still be significant, given the deadlock between Greece and its lenders over the implementation of its bailout programme. Déjà vu all over again. Again.

Eurogroup ministers are planning to look at what needs to be done to allow the first review of the bailout to be successfully completed (after many delays).

And that list includes some serious challenges, including:

...reforming the pension system, fiscal strategy, making the privatisation fund operational and addressing the issue of non-performing loans, among other issues.

The lack of progress is fuelling concerns over Greece’s position in the eurozone, particularly as the refugee crisis is putting further pressure on its economy, and fuelling EU tensions.

Former finance minister Gikas Hardouvelis has told our Athens correspondent, Helena Smith, that the situation is boiling up again:

“I think the situation right now is more dangerous than it was last summer [when Greece agreed its third bailout].

“Then it was a question of the political will of a few people.

Now it’s a question of implementing reforms and working hard and if a government doesn’t believe in them and implements them begrudgingly, progress becomes very difficult.”

It’s not been a great few months for Goldman Sachs, and clients who followed its ‘top tips for 2016’.

The Wall Street bank just closed all six trades, with five making losses.

The failed bets included:

  • Buying the dollar against the yen and the euro
  • Buying yields on Italian bonds versus German ones
  • Wagering that large US banks would outperform the general markek
  • And betting that US inflation expectations would rise

They were based on the idea that the US economy would strengthen this year, allowing the Federal Reserve to keep raising interest rates and pushing up the dollar.

Unfortunately (for Goldman), the panic that gripped investors in January and February meant the markets moved against them.

Updated

This chart of daily price moves confirms that today’s 20% surge in iron ore is way, way, outside the norm:

Commodity prices took a fierce battering in 2015, so investors may now be scrambling to get on the ‘right side’ of a rebound. Especially if fears of a global recession are fading.

Rating agency Fitch has slashed its growth forecasts but predicted the world will avoid another full-blown recession.

It now expects the world economy to expand by just 2.5% this year, not the 2.9% expected three months ago. That would only equal 2015’s growth rate.

Fitch expects advanced economies to expand by only 1.7%, down from 2.1% in December. For emerging markets, 2016 growth is now pegged at 4.0%, down from 4.4%.

Encouragingly, Fitch believes we will avoid a severe downturn. Here’s why:

“With emerging markets at the epicentre of these shocks and now accounting for 40% of world GDP it is legitimate to ask whether the world will see, for more or less the first time in recent history, an emerging market led global recession.

However, we believe several factors mitigate this risk.

Firstly, labour market conditions in many of the major advanced economies look quite robust. Along with the benefits of lower oil prices on real incomes, this should help support consumer spending in rich countries and cushion the shock.

Advanced economies look to be beyond the worst of the private sector deleveraging forces that held back domestic demand growth in the years following the global financial crisis. Furthermore, the impact of fiscal policy on growth in the advanced economies is currently less restrictive than it has been in the last few years.

Iron ore surges 19%

The iron ore price is on an absolute tear this morning, surging by almost 20%.

The cause of the mega-rally isn’t quite clear, but it follows speculation that the commodity crunch has bottomed out.

China’s latest government targets could also be driving demand. Over the weekend, Beijing committed to a target growth rate of 6.5% to 7% this year, and a budget deficit of 3% of GDP. Some traders think this equals another dose of fiscal stimulus, pushing demand for commodities up.

The city of London.

Europe’s major stock markets continue to lose ground this morning.

BIS’s warning of troubles ahead, the weak German factory orders data, and the drop in investor confidence reported by Sentix may all be weighing on sentiment on an otherwise quiet day.

In London, the FTSE 100 has now shed 55 points. Miners are the big fallers, reversing some of their recent strong rally. Anglo American has shed 4%.

Investors are already fretting about Thursday, when the European Central Bank holds its next monetary policy meeting. Everyone expects the ECB to announce something new on the stimulus front. But some fear a repeat of December’s meeting, when market expectations weren’t fully met.

Conner Campbell of SpreadEx explains:

After a tentative start the bears took hold this Monday, the European indices all sliding into the red with last week’s confidence replaced by pre-ECB nerves.

It’s unclear what has inspired this shift in sentiment; general fears over the myriad of macro-maladies currently circling the markets appears to be the driving force this Monday, with this morning’s warning from the BIS and the looming ECB meeting on Thursday only exacerbating matters. There is a chance this kind of jittery trading will continue until Mario Draghi puts the market out of its misery and reveals, for better or for worse, what ‘whatever it takes’ actually means this time around.

Eurozone investor sentiment hits 11-month low

Eurozone investor confidence has fallen to its lowest level in almost a year.

Sentix, the German research group, reports that fears over the global economy hit morale among eurozone analysts and investors this month.

Its economic index fell to 5.5, from 6.0 last month, which is the lowest since April 2015.

Patrick Hussy, Sentix’s managing director, says the Eurozone is suffering from “the loss of economic momentum of the global economy”.

Hussy’s believes it should spur the European Central Bank into agreeing new stimulus measures at Thursday’s meeting.

Investors’ perspective on the current situation in the Eurozone should resupply dovish members of the ECB council with enough ammunition to demand significantly more expansive monetary stimulus on Thursday’s ECB meeting.

Sentix’s ‘current conditions’ sub-index fell from 10.5 to 8.3, suggesting the eurozone economy has suffered from the market turbulence and gloom in early 2016

Current conditions in the eurozone

But more encouragingly, the ‘future expectations’ measure rose to 2.8, from the 1.5 it slumped to in February.

That may mean that confidence will rise again soon. Hussy says:

“Investors’ expectations are slowly turning against the negative trend.”

Sentix’s monthly report
Sentix’s monthly report Photograph: Sentix

Updated

The CEO of France’s EDF has pledged to take a ‘final decision’ soon on the Hinkley Point C nuclear reactor, following the shock resignation of his finance chief:

Dirk Schlotboeller, economist at Germany’s DIHK Chambers of Commerce. argues that German factories were lucky to only suffer a 0.1% drop in orders in January.

Schlotboeller says:

“This could have been worse in light of the bad news and turbulence on stock markets at the beginning of the year.”

Germany’s finance ministry has warned that storm clouds are gathering over its manufacturing sector.

Following the 1.6% drop in domestic factory orders in January, it says:

“Over the two months, the impulses are from abroad.

“However, expectations in industry have become considerably overcast and signal only a modest economic upswing.”

EDF shares hit by Hinkley resignation

Hinkley Point nuclear power station reactors, Somerset. 10 July 2013

Shares in French energy company EDF slumped by almost 10% at the start of trading, following the shock resignation of its finance director.

Thomas Piquemal quit after opposing the firm’s plan to build a new £18bn nuclear power station for the UK at Hinkley Point.

EDF share price this morning
EDF share price this morning Photograph: Thomson Reuters

Energy editor Terry Macalister explain:

A new plant at Hinkley, in Somerset, is desperately needed and has been heavily promoted by the chancellor, George Osborne, and other ministers as a key part of keeping the lights on in Britain.

But EDF has been hit by a series of problems that have led many – even in the City of London – to conclude that the new nuclear plant project is on the verge of collapse.

Piquemal is said to have been arguing that pursuing what would be the world’s most expensive power project at this moment could jeopardise the French group, which already has rising debts.

More here:

Updated

Germany’s stock market has slipped a little in early trading following the factory orders report.

The DAX fell almost 0.5%, with investors also digesting BIS’s warning of global turmoil ahead.

European stock markets in early trading today

German factory orders fall despite eurozone support

An image of the national flag of GermanyCTEWPR An image of the national flag of Germany

Germany has got the new week off to a poor start, by reporting that factory orders dipped last month.

Industrial orders at the eurozone powerhouse economy fell by 0.1% month-on-month, adding to a 0.2% slide in December (revised up from -0.7%).

Significantly, the fall was partly due to weaker demand from within Germany - suggesting that its economic growth may be stumbling. The Economy Ministry reports that domestic orders fell by 1.6% during the month, quite a hefty drop.

And Germany manufacturers were also heavily reliant on other members of the single currency for export sales, as it felt the impact of slowing emerging markets.

Sales to other eurozone members leapt by 7.5%, while exports to non-eurozone countries slid by 2.7%. That meant that overall export orders rose by 1%.

German factory orders

Reaction to follow...

Updated

Introduction: BIS sounds alarm over global economy

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The new week begins with a serious warning from the Bank for International Settlements that the global markets could be heading into new turbulence.

In its latest quarterly report, BIS has warned that that global credit boom could be on the point of unraveling. The “uneasy calm” that has settled on the markets in recent weeks could be about to burst.

BIS, known as the central bankers’ central bank, is worried that policymakers are now short of ammunition, at a time when the global economy looks fragile.

It reckons that the credit cycle could have reached a turning point, with as the amount of debt being issued by emerging economies stalled in the last quarter.

Claudio Borio, BIS’s chief economist, warns:

“We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time.”

BIS has been waving a red flag for years, saying the global economy has been piling up too much debt, rather than tackling the underlying problems of weak productivity and unreformed economic systems.

BIS also fired a warning shot towards negative interest rates. It fears that the new fashion will backfire - potentially making commercial banks unprofitable,.

It cautioned:

“The viability of banks’ business model as financial intermediaries may be brought into question.”

A timely warning, as the European Central Bank could impose deeper negative interest rates at Thursday’s monetary policy committee meeting.

The report is online here.

And here’s our full story on BIS’s concerns:

Also coming up today:

Eurozone finance ministers will be holding a regular eurogroup meeting in Brussels this afternoon. They’ll be considering Greece’s bailout, and the deadlock between Athens and its creditors.

There’s not much in the economic calendar, but we do get the latest Sentix investor confidence report at 9.30am GMT.

Updated

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