Here’s Ian Traynor’s report on the day’s Greek developments:
Greece has less than a week to strike a deal with its eurozone creditors to avoid defaulting on its massive debts and perhaps being kicked out of the single currency area, with German leaders and top EU officials now conceding that default is the likeliest outcome.
Negotiations between the leftist government in Athens and the creditors are now at their lowest ebb since Alexis Tsipras became Greek prime minister in January.
Chancellor Angela Merkel of Germany and Jean-Claude Juncker, the president of the European Commission, said on Friday that the talks with Greece would carry on ahead of next Thursday’s key meeting of eurozone finance ministers in Luxembourg. That meeting is now viewed as the deadline for a decision on Greece’s fate.
Merkel was said to have resigned herself to a Greek default, and at a meeting on Thursday night in Bratislava, eurocrats preparing for the Luxembourg talks included the default scenario in their discussions for the first time.
Full story here:
And on that note, it really is time to shut up. Have a good weekend, and we’re back next week.
Updated
One last thing:
Poul Thomsen will represent IMF in Brussels meetings with Greek gov. Maybe later representatives in BG join the mission @MegaGegonota
— Sofia Dimtsa (@SofiaDimtsa) June 12, 2015
#Greece mission headed by Dep PM will present proposal worth 0.25% of GDP to reach the 1% prim surplus target in 2015, mainly via VAT #ec
— Manos Giakoumis (@ManosGiakoumis) June 12, 2015
Updated
More bad news for Greece: Standard & Poor’s has cut its ratings on four Greek banks, on the basis they are likely to default in 12 months if there is no agreement between the country and its creditors. Reuters snaps:
- 12-Jun-2015 18:05:07 - STANDARD & POOR’S - RATINGS ON FOUR GREEK BANKS LOWERED TO ‘CCC’; OUTLOOK NEGATIVE
- 12-Jun-2015 18:06:31 - STANDARD & POOR’S - LOWERED LONG-TERM COUNTERPARTY CREDIT RATINGS ON GREECE-BASED ALPHA BANK, EUROBANK ERGASIAS, NATIONAL BANK OF GREECE, PIRAEUS BANK
- 12-Jun-2015 18:08:07 - S&P - DOWNGRADE REFLECTS VIEW GREEK BANKS WILL LIKELY DEFAULT IN 12 MONTHS IN ABSENCE OF AGREEMENT BETWEEN GREEK GOVERNMENT, ITS OFFICIAL CREDITORS
On that note, it’s time to close up for the day and the week. Thanks for all your comments, and we’ll be back on Monday.
Updated
And as Greece’s financial crisis grows, prime minister Alexis Tsipras meets...the Egyptian defence minister (?)
Meeting earlier with the Egyptian Minister of Defense, General Sobhi Sayed Sedky. #Greece pic.twitter.com/PM4WL4QhYV
— Alexis Tsipras (@tsipras_eu) June 12, 2015
Markets hit by Grexit fears
Reports that EU officials had discussed a possible Greek default for the first time upset markets that were already under the cosh. Thursday’s news that the International Monetary Fund had abandoned talks set the tone for the day, and conflicting reports of various planned meetings with various officials did little to improve sentiment. So the default news just added to the gloom, and even the hope of a meeting (!) in Brussels on Saturday was not enough to rescue the day. So the closing scores showed:
- The FTSE 100 fell 61.82 points or 0.9% to 6784.92
- Germany’s Dax dropped 1.2% to 11, 196.49
- France’s Cac closed 1.41% lower at 4901.19
- Italy’s FTSE MIB lost 1.27% to 22,877.81
- Spain’s Ibex ended 1.13% lower at 11,030.5
- And in Greece the Athens market slumped 5.92% to 774.46
On Wall Street the Dow Jones Industrial Average is currently down 141 points or 0.78% lower, not helped by the growing prospect of a US rate rise this year, after better than expected June consumer confidence figures.
Updated
And, once again, to Greece (or rather Brussels):
RT @Elbarbie Tomorrows mtng with #Greece ministers will be with an authorised representative of @JunckerEU no Brussels Group arranged yet.
— Yannis Koutsomitis (@YanniKouts) June 12, 2015
Updated
S&P moves UK outlook from stable to negative on EU referendum
Away from Greece and S&P has revised the outlook for the UK from stable to negative, while keeping the country’s credit rating at AAA. It points to the possible departure of the UK from the EU, with the forthcoming referendum:
- 12-Jun-2015 17:10:21 - S&P REVISES UNITED KINGDOM SOVEREIGN CREDIT OUTLOOK DOWN TO NEGATIVE FROM STABLE; CURRENT RATING IS AAA
- 12-Jun-2015 17:12:11 - S&P - POSSIBLE U.K. DEPARTURE FROM EU ALSO RAISES QUESTIONS ABOUT THE FINANCING OF THE ECONOMY’S LARGE TWIN DEFICITS AND HIGH SHORT-TERM EXTERNAL DEBT
- 12-Jun-2015 17:12:29 - S&P - U.K. GOVERNMENT’S DECISION TO HOLD REFERENDUM ON EU MEMBERSHIP SHOWS ECONOMIC POLICYMAKING COULD BE MORE EXPOSED TO PARTY POLITICS THAN EXPECTED
- 12-Jun-2015 17:12:30 - S&P- OUTCOME OF THE GENERAL ELECTION COULD MAKE CONSENSUS-BASED POLICYMAKING MORE CHALLENGING IN UK
- 12-Jun-2015 17:12:37 - S&P- “POSSIBLE U.K. DEPARTURE FROM THE EU RAISES QUESTIONS ABOUT THE FINANCING OF THE ECONOMY’S LARGE TWIN DEFICITS AND HIGH SHORT-TERM EXTERNAL DEBT”
- 12-Jun-2015 17:13:16 - S&P- IMPORTANT RISKS TO THE U.K.’S LONGER-TERM ECONOMIC PROSPECTS SHOULD IT LEAVE THE EU
- 12-Jun-2015 17:13:29 - S&P - NEGATIVE OUTLOOK ON UK REFLECTS OPINION THAT THERE IS AT LEAST A ONE-IN-THREE PROBABILITY OF A DOWNGRADE OVER THE NEXT TWO YEARS
- 12-Jun-2015 17:13:51 - S&P - “IN OUR OPINION, THE OUTCOME OF THE GENERAL ELECTION COULD MAKE CONSENSUS-BASED POLICYMAKING MORE CHALLENGING”
- 12-Jun-2015 17:14:39 - S&P - RESULTS OF THE RECENT GENERAL ELECTIONS COULD COMPLICATE POST-REFERENDUM SCENARIO IN SCOTLAND SHOULD U.K. DECIDE TO LEAVE THE EU
(snaps courtesy Reuters)
Meanwhile, more details about tomorrow’s meeting, when senior members of the Greek cabinet will fly to Brussels with the government’s latest counter-proprosals. Helena reports that, among those who will attend the talks are deputy prime minister Yannis Dragasakis, who has oversight of the government’s economic policy, Euclid Tsakalotos, the country’s chief negotiator and Nikos Pappas, the minister of state who is Tsipras’ closest political ally.
Meanwhile Reuters is reporting:
- 12-Jun-2015 17:01:28 - GREEK GOVT OFFICIAL SAYS COUNTER PROPOSALS TO FOCUS ON FISCAL ISSUES
- 12-Jun-2015 17:03:38 - GREEK GOVT OFFICIAL SAYS INSIST ON NOT RAISING VAT FOR ELECTRICITY
- 12-Jun-2015 17:06:21 - GREEK GOVT OFFICIAL SAYS DENIES REPORTS THAT “GREXIT” SCENARIOS BEEN DISCUSSED IN EU
- 12-Jun-2015 17:10:05 - GREEK GOVT OFFICIAL SAYS GREECE HOPES FOR A DEAL BY JUNE 18
Updated
Greek prime minister Alexis Tsipras is holding an emergency meeting of his top ministers to discuss how the country will proceed in the coming days with the ever fraught negotiations. Our correspondent Helena Smith reports:
Tsipras has convened a meeting of his political negotiation group that his core ministers are now all attending.
A non-paper issued by the government as the meeting continued attempted to allay fears that differences between Athens and its creditors are “unbridgeable.”
“The Greek government is ready to submit counter-proposals in order to bridge the outstanding differences, as the prime minister agreed in his meetings in Brussels notonly with the leaders of Germany and France but with president Juncker,” the non paper said, adding that both sides were closer than ever before to reaching agreement. “What is needed is the political will to understand each other.”
Another non-paper declared that Tsipras had held talks by telephone with Juncker to discuss the “next steps of the negotiation.”
But as Tsipras convened the meeting, leading cadres in his radical left Syriza party, including the interior minister Nikos Voutsis lambasted lenders for their hypocritical ways accusing the EU, ECB and IMF of deliberately trying to undermine Greece in a bid to exert budget pressure on other bigger euro zone economies such as Italy and France.
Updated
And more talks:
Greek Govt Official: Tsipras Spoke With EU's Juncker Over The Phone, Discussed Next Steps Of Negotiations – RTRS
— Live Squawk (@livesquawk) June 12, 2015
Greek govt official says greek delegation to meet institutions' reps in Brussels on Saturday #Greece
— EfiKoutsokosta (@Efkouts) June 12, 2015
"Greece closer than ever to a deal" - government official
Well there may not be any meeting in Athens, but Reuters is reporting a Greek government official saying there will be a meeting in Brussels on Saturday, and that Greece is ready to put forward new proposals:
- 12-Jun-2015 16:13:13 - GREEK GOVT OFFICIAL SAYS GREECE IS READY TO SUBMIT COUNTER-PROPOSALS
- 12-Jun-2015 16:13:49 - GREEK GOVT OFFICIAL SAYS GREEK DELEGATION TO MEET CREDITORS IN BRUSSELS ON SATURDAY MORNING
- 12-Jun-2015 16:14:11 - GREEK GOVT OFFICIAL SAYS WE ARE CLOSER THAN EVER TO A DEAL
- 12-Jun-2015 16:15:37 - GREEK GOVT OFFICIAL SAYS EUROPE SHOULD NOT HEAD TO A SPLIT OVER DEMAND FOR RESTORATION OF COLLECTIVE BARGAINING RIGHTS
No points for guessing the four worst performers in the Athex composite today. pic.twitter.com/i8eQhNlReM
— Charles Forelle (@charlesforelle) June 12, 2015
Over in Athens a virulent denial has been issued by the government following earlier reports of a resumption of talks in the Greek capital by negotiators representing the Brussels Group. Our correspondent Helena Smith reports:
As reported by the country’s Athens Macedonian news agency no less, technical teams representing the EU, ECB and IMF were due to fly into the capital this evening to continue negotiations tomorrow - a huge u-turn for a government that had pledged to keep the reviled ‘troika’ out of Greece.
Now it emerges that the agency, which had cited exclusive sources to back its claim, was misinformed after government sources this afternoon rejected the story as “the product of science fiction.”
“The Greek side has repeatedly said that negotiations at technical levels and the Brussels Group have been concluded and that that the negotiation continues at a political level,” the sources said.
That, of course, rather chafes what with the German chancellor Angela Merkel has repeatedly said: that talks must continue not only at a political level but between Greece and the institutions keeping it afloat.
Updated
Back with the eurozone and Eurogroup head Jeroen Dijsselbloem is keen to keep the job, but wants to spend less time talking about Greece:
Dijsselbloem: Hope to be reelected as Eurogroup head so "we waste less time on #Greece & spend more on Eurozone structural reforms." (@dpa)
— Open Europe (@OpenEurope) June 12, 2015
Don't know if @J_Dijsselbloem has noticed, but we spend rather a lot of time on Greece now, and he's already chair https://t.co/XQeSdDQVMv
— Mike Bird (@Birdyword) June 12, 2015
Meanwhile:
If you really think about it, #Greece is developing so predictably on the basis that someone with zero leverage and no plan played for time
— Yiannis Mouzakis (@YiannisMouzakis) June 12, 2015
Updated
In the wake of the stronger US consumer figures, the Federal Reserve may well now raise rates in September and give hints of that after next weeks meeting. That is the view of James Knightley of ING Bank, who said:
The preliminary reading of the University of Michigan confidence index for June has risen nicely to 94.6 from 90.7. This is well ahead of the consensus estimate...and is stronger than every single reading in 2013 and 2014, although is lower than some of the readings seen at the start of this year, suggesting that the household sector remains in very good shape.
The bulk of the gains came from the current conditions component, which rose 6 points, but the expectations component also rose and is at levels consistent with real consumer spending growth of close to 3% year on year.
With employment bouncing back after first quarter weakness and average hourly earnings showing signs of finally breaking out of the 1.5-2.3% year on year range it has been in since 2009, we feel that the US labour market now has some real momentum that will give the consumer greater confidence to spend. With next week’s CPI report set to suggest inflation has bottomed already we are increasingly looking for the Federal Reserve to hike rates in September with next week’s press conference and FOMC statement set to exhibit more signs of a willingness to tighten monetary policy amongst FOMC committee members
Away from Greece for a moment, and US confidence figures have come in much stronger than expected (cue talk of a US rate rise).
The University of Michigan consumer sentiment index stood at 94.6 in the preliminary reading for June.
That compares to 90.7 in May and expectations of a figure of 91.5.
More than half of Germans want Greece out of euro - ZDF survey
Germans appear to be losing patience with Greece, according to a poll for TV station ZDF published today.
According to the survey 51% of Germans wanted Greece to leave the single currency, with 70% opposed to any further concessions to Athens.
A similar survey in January found just a third wanted Greece to leave, and 55% wanted it to remain in the eurozone.
Updated
The latest setbacks to Greece’s attempts to reach a deal with its creditors before the cash runs out have sent US markets lower at the open.
The Dow Jones Industrial Average is down around 100 points or 0.57%, ahead of the latest US confidence figures due shortly.
The falls in European markets are also accelerating. The FTSE 100 has fallen 58 points or 0.85%, Germany’s Dax is down 1.4% and France’s Cac is 1.67% lower.
Meanwhile the Athens market has now lost 5.4%.
There seems to be a greater than usual weariness today with the continuing Greek drama:
Unnamed officials, people familiar with, generic sources and 3rd tier politicians. All busy crying wolf. Europe, get your act together, FFS.
— Gustavo Baratta (@gusbaratta) June 12, 2015
Breaking: There's a new Greek headline (I won't even bother).
— barnejek (@barnejek) June 12, 2015
And it was just two weeks ago that... GREECE, CREDITORS STARTED CRAFTING STAFF LEVEL ACCORD: OFFICIAL
— zerohedge (@zerohedge) June 12, 2015
Meanwhile Greece isn’t likely to leave the euro as the government wouldn’t have the capacity to issue a replacement currency, UniCredit chief global economist Erik Nielsen told Bloomberg earlier:
Arranging the production of new banknotes wouldn’t be an “easy task for a government that cannot organize a barbecue, frankly speaking,” Nielsen said in an interview on Bloomberg television on Friday. “I really don’t believe they have either the political or technical capability of starting their own currency. Money needs to be a commodity of trust, and I don’t think they have the trust in the population.”
Updated
EU discusses possible Greek default for first time - report
Senior EU officials have formally discussed a possible Greek debt default for the first time, Reuters is reporting. The agency says:
The government representatives, preparing next week’s Eurogroup meeting of euro zone finance ministers, concluded at talks in Bratislava late on Thursday that there were three possible scenarios for what would happen with Greece at the end of June. The least likely, they think, is a successful cash-for-reform deal next week in time to meet end-June legal deadlines.
The second possibility was a further extension of the current bailout programme, which expires this month at the same time as Greece must repay €1.6bn to the IMF. The the third -- discussed formally for the first time at such a senior level in the EU -- was to accept Greece could default.
The meeting reached no decision or concrete conclusion.
Most officials argued that it was unlikely that creditors would strike a deal on reforms with Athens in time to disburse the €7.2bn that remain available to Greece under a rescue programme extended in February for four months.
“It would require progress in a matter of days that has not been possible in weeks. The reaction of the ECB, the IMF and several member states was extremely sceptical,” one official familiar with the discussions said on Friday.
The Greek representative at the meeting said Athens would do everything to reach a deal in time, other officials said. That would in effect mean an agreement in time to be endorsed by the Eurogroup when it meets in Luxembourg late on June 18.
Officials said, however, that even then, disbursement of loans to Athens by June 30 would be very difficult because of the time needed to finish all the legal procedures necessary.
Therefore, their second scenario was that the current bailout would be extended to keep the €7.2bn and €10.9bn set aside for Greek bank recapitalisation, available for Athens once a reform deal is reached later.
The money will otherwise disappear and a new bailout agreement would be needed to secure further financing.
Various extension deadlines were discussed, varying from a few weeks to the end of the year or even to the end of March 2016, to align the euro zone’s programme with the end of the IMF bailout package for Greece.
Such an extension would entail imposing further conditions on Greece and could involve the disbursement of funds in tranches as those conditions were met.
Representatives of some euro zone countries, however, believe that governemnts should prepare for a third scenario -- that of a Greek default.
“For the first time there was a discussion of a ‘Plan B’ for Greece,” a second official said. Two other officials confirmed that such a debate took place.
So far euro zone officials have refrained from discussing such a possibility, even in closed-door meetings such as the one on Thursday, even though some governments, including Germany, have been preparing for it on their own.
The discussion was very theoretical because the scenario of a euro zone country defaulting within the currency union would be without precedent. The meeting came to no conclusion on it.
But officials said such a scenario would almost certainly involve Greece imposing capital controls to prevent an outflow of euros from the country and could also entail the issuance of IOUs by Athens as an alternative means of payment.
More meetings, this time Greek prime minister Alexis Tsipras and the Greek negotiators, it seems:
meantime, greek pm @atsipras is in meeting with negotiating team (via @leftgr) https://t.co/fzDSo7VTue
— Diane Shugart (@dianalizia) June 12, 2015
The Greek government official also described the International Monetary Fund’s abrupt departure from the Brussels talks yesterday as a pressure tactic.
Greek government official: ready to intensify talks
Finally, the Greek government has responded to the comments made by various figures this morning. An official said Athens was ready to intensify negotiations with its creditors on a political level, and that the technical talks had already been completed (the latter appears to be at odds with what Juncker said earlier today - see 9:53). The official stressed that the government was seeking a deal that does not cross its red lines, according to Reuters.
Updated
European stock markets are still down, with the FTSE 100 in London losing 0.6%, the Dax in Frankfurt down 0.1% (after earlier heavier losses) and the CAC in Paris shedding 0.35%.
Connor Campbell, financial analyst at Spreadex, has summed up this morning’s “action”:
German finance ministry spokesman Martin Jaeger claimed that his country is working to keep Greece in the euro, and stated that the idea circulating that the IMF had completely halted talks last night was false, but merely that the Washington-based institution was sending a warning to Greece, in a familiar turn of phrase, to intensify talks. These comments were echoed by Jean-Claude Juncker, and were enough to ease investors’ fears for now, leaving the region’s indices fairly flat even as confusion continues to pour out of the Eurozone about when and if members of the Brussels Group will arrive in Athens tonight to resume negotiations. The Greeks seem keen to play up their role as victim in this saga, which is contributing to the lack of clarity around what is actually going on.
The FTSE was looking slightly limper this morning, with disappointing construction output data and a disappointing performance from stocks like Shell and BP preventing the UK index from reversing the sleepy losses it has encountered as Friday rumbled on. The pound, on the other hand, managed to hit a 10 day high against the euro following comments from Angela Merkel that highlighted the difficulties the strong currency is causing for Ireland and Spain’s respective reforms.
With the dollar looking solid against a basket of currencies the US futures were fairly flat going into an important afternoon of data for the country. PPI figures are expected to show a big improvement on last month’s numbers, whilst the weak UoM consumer sentiment from last month has already been revised up ahead of the latest figure later today. If this set of data can match analysts’ expectations, then the last 5 days will have been the first generally positive week for US data in a long time, something that adds credence to those in the Fed arguing for an early interest rate hike.
When it comes to Greece’s perilous financial state, the president of the European Council has said “There’s no more space for gambling, no more time for gambling” – but that hasn’t deterred Paddy Power, which is offering odds of 11/10 on Greece exiting the eurozone this year.
Greek finance minister Yanis Varoufakis’ job could be on the line, and he is 11/10 to be gone by year end, while it’s possible that the Greeks may need another general election this year too – priced at 2/1.
The bookie said:
We can’t see Greece lightening up anytime soon and the same dark cloud is lingering over Yanis Varoufakis.
Greece Specials
11/10 Greece to adopt an official currency other than the euro by the end of 2017
6/4 European Commission to confirm that Greece has ‘defaulted’ on debt in 2015
2/1 Greece to hold another general election in 2015
Grexit
11/10 Greece to exit the eurozone this year
Will Yanis Varoufakis be Finance Minister on Dec 31st 2015?
4/6 No
11/10 Yes
Updated
Earlier today, Greece’s defence minister and minority party leader, Panos Kammenos, raised the stakes by saying Athens would not honour its debt repayment obligations to the IMF if a cash-for-reform deal isn’t reached this month, Helena Smith reports from Athens.
Speaking to Mega TV, the politician who also heads the government’s junior partner, the populist rightwing Independent Greeks, predicted that an agreement would have to be sealed by June 18 “or never”.
Should it not be secured by that date - which would allow the Greek parliament to endorse, legislate and implement the accord - the possibility of default would grow. Kammenos said:
If by the end of the month a solution has not been found we will not pay the IMF. We are no longer in a position to pay interest on debt.
He insisted that without receiving emergency bailout loans the cash-strapped government could simply not meet debt obligations.
Greece owes the Washington-based lender €1.5bn - four payments which it has elected to “bundle up” and hand over at the end of June.
Greece to sell €1bn of three-month T-bills on Wednesday
Greece is to auction €1bn of three-month Treasury bills on Wednesday, its third sale of short-term paper this month.
In its wrangle with its eurozone and IMF creditors, Athens has demanded an increase in the amount of T-bills it can issue to deal with its cash crisis. But the European Central Bank has resisted calls by Athens to be allowed to bridge its funding gap by having banks buy more short-term government debt before international lenders release more aid.
More comments from European Commission president Jean-Claude Juncker: he told a press conference that the IMF’s decision to withdraw its negotiating team from Brussels did not mean that the Fund has given up on reaching a deal with Greece. He said:
I don’t think one can interpret the International Monetary Fund’s action as meaning that the International Monetary Fund will leave the negotiations.
I spoke at length with the Greek prime minister last night and I will probably do so in the days to come... I think a solution is necessary.
Eurozone industrial production barely grew in April
Meanwhile, the eurozone industrial production figures were weaker than expected, but economists noted that this was due to a big fall in energy production while other areas were stronger. They added that the figures tend to be volatile and should not cause too much concern.
The euro area’s industrial sector grew less than expected in April, eking out only modest growth of 0.1% (compared with forecasts of a 0.3% rise) after a steeper than previously thought decline of 0.4% in March, according to Eurostat.
Chris Williamson, chief economist at Markit, said:
Weak industrial production data are a reminder of the fragility of the euro area economy, but should not be a cause for excess pessimism. In fact, the data include some promising signs of life for the sustainability of the region’s recovery.
The marginal expansion in April comes as a disappointment... but one that looks better once we dive into the data. In particular, there are signs that companies are restocking and investing more in equipment such as computers, plant and machinery.
The weakness was driven by a 1.6% fall in energy production, most likely linked to the lower oil price, and 0.8% drop in non-durable consumer goods. More promisingly, production of capital goods such as computers, plant and machinery rose 0.7%, and output of durable consumer goods jumped 1.0%, both sectors enjoying the largest rises since December. Production of intermediate goods meanwhile rose 0.3%, also the largest increase since last year, suggesting that manufacturers are restocking.
The Athens official news agency is now reporting that Greek government sources denied that negotiators from the Brussels group would arrive tonight – describing the earlier report as a “figment of the imagination”. Confusion reigns...
The pound has hit a ten-day high against the euro, amid worries over a Greek default and comments about the euro’s strength from Angela Merkel [see 10:29].
The euro fell 0.65% to 72.1p, its lowest level since 2 June, and is on track for its first weekly loss in three. Merkel said a “strong strong” euro would make it harder for eurozone countries to carry out reforms.
The German finance ministry spokesman, Martin Jaeger, said there were no other special meetings planned on Greece, ahead of the Eurogroup next Thursday. He stressed that a deal without the involvement of the IMF was unthinkable, and declined to speculate about an extension of the second bailout programme for Greece. He added that the international institutions had shown a great deal of flexibility with Athens.
Updated
Government spokesman: Germany working to keep Greece in eurozone
A spokesman for the German government has denied that its position has changed, after tabloid Bild reported that Merkel’s government was preparing for Grexit [see 8:25]. He said Germany was working to keep Greece in the eurozone, according to Reuters.
The spokesman also said the IMF’s decision to pull its delegation out of talks in Brussels was a warning to Greece to intensify the negotiations. He added that the Fund had not broken off talks with Greece.
Updated
EU negotiators expected in Athens tonight, says report
The members of the Brussels Group will arrive in Athens tonight to continue the negotiations tomorrow, according to the Athens-Macedonian News Agency.
Meanwhile, the chair of the Eurogroup of finance ministers, Jeroen Dijsselbloem, has insisted that “serious proposals” are a prerequisite for further talks with Greece.
Merkel, speaking to business leaders in Berlin, also expressed understanding for low interest rates in the eurozone, suggesting they had underpinned reform efforts in countries like Spain and Portugal by preventing the euro from rising too much.
She said a strong euro “means that it is more difficult for [countries like Spain and Portugal] to reap the benefits of reforms.”
She added:
At the very least I’d like to ask for your understanding that central banks, like the European Central Bank, have to think about what to do if the inflation rate is so low and to ensure that we don’t end up in a deflationary cycle.
Some comments from Angela Merkel on Greece flashing on Reuters. Speaking in Berlin, and using the same phrase as earlier this week, she said:
Where there is a will, there is a way, but the will must come from all sides.
That’s why it’s important to keep talking, she added. She also said:
It’s not the first time that structural reforms have to be undertaken in a eurozone country.
Updated
Returning to the UK construction data [see 9:37], upward revisions to back data mean the economy grew 3.1% in 2014, rather than the prior 2.8% estimate. A 2.2% contraction in the fourth quarter of last year, for example, has been revised away to show 0.2% growth. Chris Williamson, chief economist at Markit, says:
The UK economic upturn over the past year has been stronger than previously thought after substantial data revisions show that the construction sector has not acted as such a drag on the economy. The revisions bring the economy’s performance more into line with recent survey evidence.
Our expectation is that building activity, and growth in the wider economy, will continue to revive in coming months, though the strong pound and prospect of rising interest rates will probably mean 2015 growth fails to match the impressive 3.1% expansion that the ONS now estimates was seen in 2014.
Talks between Athens and creditors to restart soon, says Juncker
EU Commission president Jean-Claude Juncker said negotiations between Greece and its creditors will resume soon, and will initially involve technocrats, then politicians. Like Dijsselbloem – who is expected to be re-elected as head of the Eurogroup according to reports – Juncker insisted that the “ball is in Greece’s court”. The comments came in an interview with radio station France Culture.
Updated
The Athens stock market is still down 3.35%, after opening 4% lower, the euro has slipped and Greek bond yields have risen.
Greek 10 year yields up 25bp to 11.49 .... not a huge move by recent standards ... is a kind of modest thumbs down
— Steve Collins (@TradeDesk_Steve) June 12, 2015
UK economic growth stronger than thought in Q1 and 2014
Britain’s economic growth was stronger than previously estimated last year and at the start of 2015, the Office for National Statistics said this morning.
Revisions to construction sector output, following changes to the way price changes and seasonal adjustments are calculated, mean that all other things being equal, GDP rose 3.1% in 2014, rather than 2.8% as previously thought.
The revisions also mean that GDP in the first quarter of this year grew by 0.4%, rather than 0.3% as previously reported.
Construction output in the first quarter was revised to show a fall of just 0.2%, from a decline of 1.1%. Construction makes up 6.4% of Britain’s economy.
Updated
The head of the eurogroup of finance ministers, Jeroen Dijsselbloem, has refused to speculate about the likelihood of a Greek exit from the eurozone, according to reports.
But the ball is in Athens’ court, he said in an an interview with Finnish newspaper Helsingin Sanomat conducted yesterday.
If the Greek government can’t accept the fact that there are no easy solutions and that the difficult decisions just must be made, it is alone. We can’t help Greece if Greece doesn’t want to help itself.
The Dutch finance minister held out hope that a cash-for-reforms deal could still be reached in time to unlock more aid for the debt-crippled country before the end of the month.
The political decision could be made even tomorrow as long as it is credible and secures Greece’s financial independence.
Stathis Kalyvas, professor of political science at Yale University, tweets:
The argument by Varoufakis that Greece needs support to begin reforming is hollow & misleading; only reforms in four months are regressive
— Stathis Kalyvas (@SKalyvas) June 12, 2015
YANIS, STAHP! STAHP! #Greece https://t.co/2m3XZDPDmC
— The Greek Analyst (@GreekAnalyst) June 12, 2015
Updated
Greece’s finance minister Yanis Varoufakis denies EU claims that Athens is gambling with its future.
Contrary to stubborn rumours, we never gambled. http://t.co/CAHwnx4HoH
— Yanis Varoufakis (@yanisvaroufakis) June 12, 2015
The euro has slipped this morning, falling 0.3% to $1.122. It has been surprisingly robust against the dollar, however.
Deadlines for Athens to secure a cash-for-reforms deal with its international creditors have come and gone, but analysts believe it’s going to get harder.
Ian Stannard, head of European FX strategy at Morgan Stanley in London, told Reuters:
It does seem like we are finally getting to crunch time now, some decisions have to be made.
Updated
Should Greece remain in the eurozone? 51% of Germans now say ‘Nein’ and 41% say ‘Ja,’ according to the latest Politbarometer from German broadcaster ZDF.
At the start of the year, 55% of Germans wanted Greece to stay in the euro, while a third were against.
The Athens stock exchange opened 4.1% lower... and Greek banking shares are down sharply.
Greek banks down 7.9% - again less than the 10% they rose y;day
— Steve Collins (@TradeDesk_Steve) June 12, 2015
Robert Kuenzel, economist at Daiwa Capital Markets says that if no agreement is reached by the eurozone finance ministers’ meeting next Thursday, the spectre of potential Greek default and eventual Grexit could hang over the EU summit on 25-26 June .
Worrying signs on Greece mounted overnight. Negotiations with creditors remain log-jammed as Greece appears to be sticking to its position on pension reform, VAT changes and the overall pace of fiscal consolidation. Indeed, the working dinner of senior Eurogroup officials reportedly issued a 24-hour ultimatum to the Greek authorities to present suitable proposals.
Of course, it remains to be seen if this really is a hard deadline, and what the consequences might be if it were to be missed. The notion of a hard deadline has become somewhat meaningless in the Greek context. However, we believe Greece and its creditors might have only another week or so to reach a comprehensive agreement that could allow an extension of the current programme beyond June and offer the promise of fund disbursements to meet the end-June IMF payment and, more importantly, the July repayment to the ECB.
In the coming days we don’t expect any material progress to be made at technical level. Only at the political level can a deal be done, explaining why the IMF recalled its negotiating team from Brussels to Washington yesterday citing “significant differences in all major areas” and presumably seeing no chance of bridging these gaps in the near term.
And if anything, the position of the institutions might be expected to harden, rather than soften, in the coming days as time marches on towards the expiry of the programme on 30 June.
Bild reports that Merkel is no longer ruling out a Greek default and exit from the eurozone, after two-hour nocturnal talks in Brussels with French president François Hollande and Tsipras earlier this week. Tsipras refused to compromise, rejecting EU demands such as higher VAT. In addition, the German chancellor is under mounting pressure from within her own party.
The Dax in Frankfurt lost as much as 0.8% to 11,246 this morning, amid fears of a Greek default. German tabloid Bild reported that Angela Merkel’s government was preparing for Grexit.
Angus Campbell, senior analyst at FxPro, takes a look at the euro, which has been fairly resilient:
Markets seem relatively sanguine as we end the week which has seen no progress in respect to the Greek debacle and today was supposed to mark the second repayment to the IMF of the month.
The euro continues to defy the bears holding ground against the dollar around 1.1220 this morning, 0.7235 against sterling and 138.60 against the yen. The single currency remains a focus as investors await a resolution to Greece’s quandary and debates rage over whether the existing bailout will be extended or a brand new third bailout will be proffered.
There are problems on all sides to either option, especially the third bailout as this would involve debt restructuring that could potentially inflame the anti-austerity sentiment that is establishing itself in other parts of the eurozone, namely Spain and this is becoming a worry for Europe’s leaders.
The reality remains that without some sort of agreement Greece is not going to get through the summer without some sort of default whether that be a non-payment to the IMF, ECB or other creditors. If this remains the scenario it is hard to see much upside to the euro in the coming weeks.
European stock markets have opened lower, in a belated reaction to yesterday’s IMF walkout. The FTSE 100 in London opened nearly 30 points lower and is now down some 15 points, or 0.2%, at 6830.83. Spain’s Ibex has lost 0.5%, Germany’s Dax is down 0.4% and France’s CAC has shed 0.3%.
On the data front, the guys at Accendo Markets are highlighting:
In focus today we have eurozone industrial production which is seen rebounding in April from contraction in March. In the afternoon, US producer price inflation is seen improving to inflationary territory, likely helping the dollar by buoying the case for a Fed rate hike. The University of Michigan is expected to tick back up after its dropping to a 6-month low.
Mike van Dulken and Augustin Eden at Accendo Markets are calling the FTSE 100 index 25 points lower at at 6820, as markets react to the IMF walkout.
Creditor rhetoric become notably aggressive towards Greek PM Tsipras in terms of continued backtracking on ‘progress’ (EU says ‘gambling’ must stop; talk of ‘time-wasting, incompetence and deviousness’) as clock ticks towards key debt payments, the coffers run dry and default/Eurozone exit becomes distinct possibility.
Tsipras did not appear too downcast when he returned to Athens from talks in Brussels last night, and headed straight to the launch party of public broadcaster ERT. There were tears (not from Tsipras as far as we know) when the state radio and television organisation aired its first broadcast in two years, after it was shut down under the government’s austerity drive. It has rehired most of the staff fired.
Tsipras had called ERT’s closure “a great wound” of his country’s bailout.
Updated
Good morning, and welcome to our rolling coverage of the Greek bailout talks and other events across the world economy, the financial markets, the eurozone and business.
Despite the IMF walkout, the Greek state minister hopes Greece will clinch a deal with its international lenders at a meeting of eurozone finance ministers next Thursday.
State minister Alekos Flabouraris told the newly relaunched state television ERT:
I hope it [a deal] will come very soon, on June 18, when the Eurogroup takes place.
Negotiators from the International Monetary Fund headed back to Washington yesterday, citing major differences with Athens over labour market and pension reforms. The clock is ticking down, with Greece due to repay €1.5bn to the Fund by the end of the month.
The surprise IMF move came as the European Union took a harder line, telling Greek prime minister Alexis Tsipras to stop “gambling” with his cash-strapped country’s future and take the action needed to avert a devastating default.
Markets took the IMF walkout in their stride yesterday, but are expected to open lower today.
Michael Hewson, chief market analyst at CMC Markets UK, says:
The announcement that IMF officials were walking away from the negotiations with Greece was as sudden as it was unexpected, as was the tone of the officials, who came across as extremely downbeat. In short the verdict was scathing, with officials citing that the gaps between the relative negotiating positions hadn’t been bridged at all.
The logjam appears to revolve around pension and labour market reform which Greece remains unwilling to compromise on, and when looking at the demonstrations that took place back in Athens yesterday it’s not hard to see why. Even if Greece does compromise on the issues the IMF wants change on, there is no guarantee that they would be able to implement them and therein lies the rub.
But, he added:
It would appear that each side thinks the other is bluffing with Greek officials banking that US pressure could well see the EU compromise, or that Angela Merkel won’t want to go down as the German leader who oversaw the beginnings of the break-up of the single currency.
Updated
