Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2pm) and Nick Fletcher

Greek bonds and shares surge after debt relief progress - as it happened

Prime minister Alexis Tsipras has told his cabinet that Greece is not isolated, after eurozone minister conside debt relief
Prime minister Alexis Tsipras has told his cabinet that Greece is not isolated, after eurozone minister conside debt relief Photograph: Thanassis Stavrakis/AP

European markets welcome Greek progress

The positive mood which followed Monday’s Eurogroup meeting on Greece has helped lift European markets, along with some upbeat company results and a strong start on Wall Street. Investors shrugged off renewed concerns about a slowdown in China, with commodity companies recovering from early losses, and Brent crude rising 3.8% to $45.29 as supply issues resurfaced. The final scores showed:

  • The FTSE 100 finished 41.84 points or 0.68% higher at 6156.65
  • Germany’s Dax was up 0.65% at 10,045.44
  • France’s Cac climbed 0.36% to 4338.21
  • Italy’s FTSE MIB added 1.41% to 17,934.72
  • Spain’s Ibex ended up 1.32% at 8775.2
  • In Greece, the Athens market ended up 3.15% at 629.29

On Wall Street the Dow Jones Industrial Average is currently up 189 points or just over 1%.

On that note, we’ll close for the evening. Thanks for your comments, and we’ll be back tomorrow.

The International Monetary Fund is reportedly doing a wait and see act after Monday’s Eurogroup meeting:

And the yield - or interest rate - on Greek bonds have fallen to their lowest level this year. The 10 year yield is down 66 basis points to 7.47% as investors hold out hope that the country has moved closer to a bailout agreement with its creditors.

Greece’s stock market is up by 3.15% at 629.29, helped by the optimism following Monday’s Eurogroup meeting.

Looks like the Greek government is getting on with things ahead of the new 24 May deadline of the next Eurogroup meeting.

The US market has been supported by the latest jobs data. This showed job openings - a sign of confidence in the employment market - rising from 5.61m to 5.76m in March, and is a positive development after Friday’s weaker than expected US non-farm payroll numbers. Connor Campbell, financial analyst at Spreadex, said:

Whilst the market enthusiasm for the day’s Greek good news began to wane this afternoon a strong US open helped secure a decent chunk of the morning’s European gains.

Continuing to make do with a selection of B-tier data the Dow Jones was nevertheless lifted by Tuesday’s improved Jolts job openings figures, especially following last Friday’s non-farm disappointment. The number hit its best level since the financial crisis at 5.76 million, surpassing both expected 5.55 million and the last month’s upwards-revised 5.61 million. This helped push the Dow to a 160 point rise after the bell, the index crossing the 17850 mark for the first time in a week.

The eurozone saw the biggest drop off this Tuesday, the Cac shedding two thirds of its morning growth whilst the Dax lost around half. Yet the indices remain up by 0.5% and 0.6% apiece, that jump crucially leaving the German bourse above the 10000 mark.

Wall Street opens higher

US markets are sharply higher in early trading, helping give some support to flagging European shares.

The Dow Jones Industrial Average is currently up 155 points or 0.8% while the S&P 500 opened 0.5% ahead, as higher oil prices boosted energy shares.

Optimism about Greece following Monday’s Eurogroup meeting has also helped sentiment.

The FTSE 100 is up 0.6% while Germany’s Dax has added 0.46% and France’s Cac has edged up 0.09%.

In Greece, the Athens market is up 2.76%.

As for oil, Brent crude is 2.6% better at $44.8 a barrel following supply disruptions in Canada and Nigeria, which have knocked out 2.5m barrels of daily production.

The European Bank for Reconstruction and Development is set to buy * take over the management of its first batch of bad loans from Greek banks in the coming weeks.

In an interview with Reuters EBRD director Sabina Dziurman said the move should mean the bank would spend more in Greece this year than the €320m last year. The EBRD has already invested €250m in equity stakes in Greece’s four biggest banks.

(* corrected to make clear EBRD would not directly buy bad loans but take over the management of them)

Updated

And more: soaring car sales.

Earlier there was a raft of Greek economic data.

Industrial production fell 4% in March, compared to a 3% decline in February. There was a 23.8% drop in mining production and a 2.5% fall in manufacturing production.

Meanwhile the economy remained in deflation for the 38th month in a row in April, with the consumer price index falling 1.3%. This was slighly higher than the 1.5% decline in March, and the 2.1% fall seen in April last year.

Finally the trade deficit shrank by 23.7% in March, making a 6.9% decline for the first quarter. Imports fell 17% to €3.6bn, while exports dropped 11.4% to €2.36bn.

Greek shares hit 2016 high

The main Greek stock index has hit its highest level of the year.

The Athex general composite index is up almost 3%, driven by relief that Greece’s next bailout instalment could be signed off at the May 24 eurogroup meeting.

Bank shares are among the top risers, as the threat of a default or Grexit eases.

The best-performing shares in Greece today
The best-performing shares in Greece today Photograph: Thomson Reuters

Some analysts are optimistic that the gap between Germany and the IMF over debt relief has narrowed (as UBS argued this morning).

Other experts, though, fear that the Greek crisis could easily flare up soon.

Reuters explains:

“There continues to be disagreement, in the creditors’ camp in particular, about the way forward,” DZ Bank strategist Hendrik Lodde said. “Because of the diverging opinions...talks are presumably going to drag on even further.”

Greek bonds are continuing to rally today, pushing down the interrst rate on the debt to the lowest level this year:

Greece’s Prime Minister Alexis Tsipras, right, speaks with Deputy Prime Minister Giannis Dragasakis during his government cabinet meeting today.
Greece’s Prime Minister Alexis Tsipras, right, speaks with Deputy Prime Minister Giannis Dragasakis during his government cabinet meeting today. Photograph: Thanassis Stavrakis/AP

Wisely, Alexis Tsipras also urged his cabinet to avoid sounding too upbeat:

“Greece is leaving behind six years of recession and darkness. I want to repeat, this is not the right time for celebrations.”

Tsipras: Greece isn't isolated

Greek prime minister Alexis Tsipras just declared yesterday’s eurogroup meeting a success.

Tsipras has told his cabinet that the commitments to debt relief show that his country is not isolated within Europe.

He also pledged that the current bailout review will be concluded without the need for extra austerity, on top of what was agreed in August.

The PM says:

Greece is not alone and isolated. It enjoys the support of political forces and governments which have finally realised that this country and its people have the right to turn a page.

This TV shot, though, suggests cabinet ministers are less than euphoric:

Updated

Syriza MPs: How can we support more austerity?

The Greek parliament building, in Athens.
The Greek parliament building, in Athens. Photograph: Angelos Tzortzinis/AFP/Getty Images

Greek MPs in Alexis Tsipras’s Radical Left party have told us they are appalled that they will soon be forced to vote through yet more measures before their bailout review can be concluded in two weeks.

From Athens, Helena Smith reports:

The prospect of having to backing to a bevy of indirect taxes - as well as a mechanism that would automatically trigger across-the-board cuts in the event of finances veering off course – before the next eurogroup on May 24, is being viewed with alarm.

“The price of power is falling hard,” said one MP, who asked that I not mention his name at such a sensitive time.

“How can we, in all honour and honesty, return to our constituencies and face voters? Even with our heads covered a lot of us now don’t want to confront them.”

Tsipras’ embattled two-party coalition may have been given a breather but its popularity has been plummeting in the polls. The main opposition New Democracy has seen its ratings surge since the moderate Kyriakos Mitsotakis was elevated to the helm of the party in January with a ‘Pulse’ poll last month showing the centre right party leading by six points in vote intention if fresh elections were held.

Mitsotakis, who has opposed the latest reform package on the basis that it is too tax heavy, lead Tsipras by 7 percentage points on the question of ‘who is more suitable to be prime minister?’

Tsipras, who got the backing of all 153 MPs in Sunday’s vote, has says that once the heavily frontloaded programme passes parliament, the leftist-led coalition can get on with the real business of ruling.

We mentioned earlier that eurozone officials are worried about Greece’s debt sustainability.

Well, the Wall Street Journal has now produced an excellent chart showing the official forecasts for Greece’s borrowings over the next few decades.

It confirms that Greece’s debts (currently 180% of GDP) will remain alarmingly high in 45 years if it fails to meet targets for growth, spending and privatisations.

Greek debt sustainability forecasts

Here’s the full piece:

Eurozone Asked to Consider More Concessions on Greece’s Debt

People on the streets of Athens don’t share the optimistic mood in the financial markets today.

Many Greeks are simply struggling to make ends meet after years of austerity cutbacks and tax rises, as our correspondent Helena Smith reports:

In his tiny shop in downtown Athens, Kostis Nakos sits behind a wooden counter hunched over his German calculator. The 71-year-old might have retired had he been able to make ends meets but that is now simply impossible. “All day I’ve been sitting here doing the maths,” he sighs, surrounded by the undergarments and socks he has sold for the past four decades.

“My income tax has just gone up to 29%, my social security payments have gone up 20%, my pension has been cut by 50 euros; they are taxing coffee, fuel, the internet, tavernas, ferries, everything they can, and then there’s Enfia [the country’s much-loathed property levy]. Now that makes me mad. They said they would take that away!”...

Here’s the full piece:

Updated

Analyst: three-pronged Greek debt relief should work

Wolfango Piccoli, analyst at Teneo Intelligence, reckons the new three-pillar approach to Greek debt solution should win the crucial backing of both Germany and the IMF.

That’s because it effectively kicks the issue into the long grass until 2018, when the current bailout expires.

Wolf explains:

The idea is to address debt sustainability in the short term via strategies of debt management (including options such deferred interest rate payments, lock-in interest rates and adjusting the repayment schedule), in the medium term (post program conclusion in 2018 conditional upon the successful implementation of the ESM program) via interest rates, grace periods, and potentially by usage of SMP and ANFA profits, and in the undefined longer term by looking, if necessary, into undefined additional debt measures to ensure Greece’s debt sustainability.

This three-segment structure achieves two things. It offers reassurance to the IMF that the question of debt sustainability will be addressed both immediately and then, in a more substantial manner, at the conclusion of the program. At the same time, it delays this painful conversation in Berlin to 2018, a date after the next Bundestag elections in September 2017. This structure should therefore allow the IMF to participate and the Bundestag – which will decide in a full plenary session – to greenlight the deal.

French finance minister Michel Sapin has issued a statement applauding Greece’s efforts.

On the reform programme, Sapin says:

The first aim of the French Government is to honor and support the considerable efforts that have been made by the Greek government and this majority. From the point of view of France, the Greeks proved that we could trust them.

And on the sustainability of the Greek debt, Spain says that three essential elements are needed:

  1. structural reforms to support greater growth and competitiveness,
  2. fiscal measures that allow Greece to run a surplus
  3. creditors must produce a ‘vision’ of how Greece’s debt can be sustainable

Updated

Swiss bank UBS believes yesterday’s eurogroup meeting yielded several positive developments for Greece.

For example:

1) Eurozone ministers endorsed Greece’s latest economic reforms, meaning €5bn of bailout funds should be handed over soon.

2) A general framework for debt relief has finally been established (starting with some modest short-term moves)

In a note to clients, UBS say:

This is the first time there is clarity on debt relief as well as a clear signal that Eurozone member states are willing to act on Greek debt. Additionally, the allusion to lower long-term primary surpluses is arguably not only macroeconomically sensible but a way to satisfy the political desideratum of keeping the IMF involved in the Greek bailout.

Finally, the above helps the Greek government build its success story via programme compliance, thereby incentivising it to persist on the conciliatory path with its creditors.

UBS also point that Greece has several ‘loose ends’ to tie up, including getting parliamentary approval for the last few prior actions agreed with creditors.

Greek bonds and stocks are surging

Greek government bonds are jumping in value this morning, as traders welcome the eurozone’s commitment to granting Athens some debt relief.

The yield, or interest rate, on Greek 10-year bonds has hit a six-month low as money pours back into Greek debt.

Greek 10-year bonds are now yielding just 7.9%, the lowest since last November:

7% is usually seen as the ‘danger zone’ where a country cannot borrow on the markets, triggering a bailout.

Investors are calculating that the risks of a Greek default have fallen, but haven’t completely disappeared.

Shares are rallying in Athens too, sending the main Greek stock index up over 2%.

The City is relieved that Germany appears to have softened its opposition to Greek debt relief (see earlier post).

Jeremy Cook of World First, the foreign exchange firm, explains:

Yesterday saw the greatest opponents of debt relief, Germany, hint that they were open to the possibility of debt relief and an agreement will be sought.

It will come as no surprise that the stick that accompanies this carrot is to enact long needed further pension and spending reforms.

And we should also remember that full blown debt write-offs are not on the table. Instead, Greece’s creditors could cap interest payments, extend maturities, or grant a delay on repayments.

Updated

A couple of Greek front pages today:

A young businessman near the Gherkin building

European stock markets are rallying in early trading, partly driven by hopes of a deal between Greece and creditors in two weeks time.

Britain’s FTSE 100, the German DAX and French CAC have all gained 0.8% this morning.

Optimism over Greece is countering some alarmingly weak German and French industrial production figures this morning, which suggested eurozone factories struggled in March.

Conner Campbell of SpreadEx says the markets look “fairly bubble, even though Athens still has work to do:

With the Eurogroup finally holding their first serious discussion about Greek debt relief there was a sense of tentative hope in the air after Monday’s meeting.

Now all that has to be done is for the country to outline a post-fiscal target failure contingency plan AND implement some more unpopular reforms in the next fortnight, before the finance ministers meet once against on the 24th May. Easy!

Eurozone ministers are desperate to avoid another Greek crisis this summer that might drive Britain into leaving the EU.

So argue The Times today:

Updated

Greek PM to brief cabinet about eurogroup

Newsflash from Athens: prime minister Alexis Tsipras will brief cabinet ministers at 1pm local time, or 11am BST.

Last night, Tsipras told the Greek president that things are moving in the right direction, with a positive result expected on May 24.

Opposition MPs, though, are less impressed. They point out that Greece has to actually implement the unpopular income tax rises and pension reforms that were voted into law on Sunday, and still isn’t getting significant debt relief until 2018.

Greek pensions and wages would be cut again if the country is forced to implement the ‘contingency measures’ agreed with creditors at last night’s meeting in Brussels.

Greek newspaper Kathimerini explains:

The proposal for the automatic mechanism sent by Athens indicated that apart from some welfare spending, no form of expenditure would be protected from automatic reductions. This includes pensions and public sector wages, even though the coalition had repeatedly indicated that it would like to ringfence them.

Those contingency measures would only kick in if Greece failed to hit its fiscal targets - something the IMF is particularly worried about.

Updated

Analysts at Canadian bank RBC have a neat summary of yesterday’s developments in Brussels:

As expected yesterday’s Eurogroup did not sign off on the first review of Greece’s third programme but there was progress on the so-called ‘contingency measures’ that Greece has been asked to legislate for.

Ministers agreed that they would allow Greece to legislate a ‘mechanism’ for additional measures if budget targets are off-track. Technical talks, including with the IMF, on the proposal will now take place before the Eurogroup now meets again on May 24th.

Greek debt relief was also discussed with agreement on a road map for considering further debt measures including tasking the euro working group (EWG) with looking at debt sustainability in Greece.

Germany’s Wolfgang Schauble (left), eurogroup chief Jeroen Dijsselbloem (centre) and Belgium’s Johan Van Overtveld (right) at yesterday’s meeting.
Germany’s Wolfgang Schauble (left), eurogroup chief Jeroen Dijsselbloem (centre) and Belgium’s Johan Van Overtveld (right) at yesterday’s meeting. Photograph: Isopix/REX/Shutterstock

The Financial Times has given Germany the credit for helping to break the deadlock between Greece and its creditors, by easing its objections to debt relief talks.

They explain:

The political space for a deal was opened on Monday by the readiness of Wolfgang Schäuble, Germany’s finance minister, to explore ways to ease Greek debt repayments.

He had, until then, strongly resisted such talks as unnecessary, putting IMF participation in the programme in doubt.

That could be a significant change of position for Germany, if a deal is reached by May 24.

Reuters: Greek debt sustainability concerns

At the heart of the Greek crisis is the question of whether Athens’ borrowing can ever be tackled, or will spiral further out of control.

And documents presented to eurozone ministers yesterday, and seen by Reuters, suggest serious concerns over this issue.

Analysts at the European Stability Mechanism have predicted that Greece would manage to run a surplus of 3.5% from 2018 until 2025, dipping to 1.5 % from 2040-2060.

Such a chunky surplus sounds challenging. And even if this ‘main scenario’ is correct, the document shows that Greece’s creditors would need to cut the interest rate on Greek bonds and extend their maturity, to make the burden sustainable.

Reuters’ Jan Strupczewski explains:

If the main ESM scenario were to prove accurate, the euro zone, Greece’s main lender, could achieve Greek debt sustainability through three actions:

  • the extension of the maximum weighted maturity by 5 years to 37.5 years
  • a re-profiling of the amortization scheme by setting loan repayments as 1 percent of GDP until 2050 and linearly amortized after that
  • a capping of interest charged to Greece at 2 percent, with any interest that would have been payable in excess of the 2 percent being deferred until 2050. The accumulated and capitalized deferred interest would then be repaid in equal instalments.

And if the central scenario is too optimistic, of course, deeper debt relief would be needed. In the ESM’s negative scenario, Greece’s debt spirals from 180% of GDP today to almost 260% of GDP by 2060....

More here: Euro zone Greek debt analysis shows serious concerns over its sustainability

The agenda: A new Greek deadline

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

The clock is ticking for Greece again today, after eurozone finance ministers set a deadline of May 24 to reach a deal to unlock €5bn of bailout cash.

Yesterday’s Eurogroup meeting appears to have made some progress, with ministers finally holding their first talks on debt relief.

But before that can happen, Greece still needs to prepare a contingency mechanism that would automatically cut public spending if it fails to hit its fiscal targets (as the IMF fears).

Athens also needs to push through a few more reforms, including creating a privatisation fund, before the next eurogroup meeting in two weeks time. So there’s still opportunity for more drama.

Also coming up today...

New German industrial production figures are just being released. They look worse than expected; falling by 1.2% month-on-month, so we’ll keep an eye on that.

The latest UK trade figures are due at 9.30am BST, and likely to show that Britain ran our traditional current account deficit in April.

The commodity sector is coming under pressure too, with prices of key metals slumping sharply in recent days.

And we’re getting financial results from, among others, Swiss bank Credit Suisse and airline easyJet.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Zendaya Pregnancy Rumors Resurface as Secret Marriage Leaks—Is This the Real Reason for Tying the Knot?
Zendaya pregnancy rumours return amid news of a hidden marriage, leaving fans eager for confirmation from the couple.
International Business Times UK
International Business Times UK
Jim Carrey Theories Reach New Heights After Drag Queen Reveals Mask He Wore To Pose As The Actor
“How much they pay you to try and close this theory up?”
Bored Panda
Bored Panda
Strong opinions matter: Why some birds refuse to follow the flock
We like to think that animals, including humans, follow the crowd. Think of a flock of pigeons taking off from the city square together or the recent frenzy over labubus. If most of the group does something, surely the individual will copy.
The Conversation
The Conversation
‘You know when you’ve hit it – it’s a transformation’: Ruth E Carter on building the bold world of Sinners
The two-time Oscar winner on dressing Michael B Jordan’s twin antiheroes, her start with Spike Lee and crafting the period detail of Ryan Coogler’s genre-bending epic
The Guardian - UK
The Guardian - UK
Zendaya and Tom Holland are married, stylist Law Roach claims at Actor Awards
Couple’s engagement was confirmed in early 2025
The Independent UK
The Independent UK
From Heated Rivalry to the White House, hockey is having a strange American moment
Kash Patel’s partying went viral and the US men’s team came to Washington. Now it’s all part of the culture war
The Guardian - US
The Guardian - US
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play