The ECB head Mario Draghi will be fielding questions in Frankfurt today, whilst the Italian PM Mario Monti will be visiting the US. Not sure if Monti will be visiting Princess Peach, or if Draghi will have Yoshi and Toad for company, or if Bowser will spoil the fun at Draghi’s question time, no doubt all will be revealed..
Greek leaders failed on Thursday to finally agree on the terms, reforms and austerity measures of the wider bailout and swap arrangement in order to avoid a disorderly default. Finance Minister Evangelos Venizelos will now go to the country’s financial backers with an incomplete deal. Euro zone officials say the full package must be agreed with Greece and approved by the EU, European Central Bank and IMF before February 15 in order that the legal paperwork can be completed in time to avoid a chaotic default that could threaten global economic recovery.
Venizelos emerged shortly before dawn after an all night meeting to say that one issue was unresolved, the issue of pension cuts in the public sector;
[quote]I am leaving for Brussels in a short while with the hope that the Eurogroup meeting will be held, and a positive decision on the new program will be taken. The financial survival of the country in the coming years depends on the new program. It is time of responsibility for everyone.[/quote]
The Greek national press appear to be softening up to the inevitability of acceptance, even the centre-left daily Ta Nea is issuing a defeatist tone of acceptance, writing in the first-page editorial they stated;
[quote]The measures that are being imposed on Greeks so as to ensure the restructuring of the debt have the same, unsuccessful recipe: more cuts, which will cause deeper recession and will create the need for new cuts. A vicious circle. Unfortunately, we do not have the ‘No’ choice to this policy. We either reduce the debt and stay in the euro zone, even if we become much poorer, or we default. There is not a third choice.[/quote]
Financial daily Imerisia stated;
[quote]The memorandum seems, and in fact is, heavy and unbearable for the majority of the Greek people but unfortunately it is the only choice so that the country is not led over the cliff.[/quote]
Here’s a flavour of (previously) what was considered worth fighting for (and against). According to unconfirmed reports in the Greek media, the measures were aimed at trimming 3.2bn euros;
[unordered_list style=”red-x”]
- The monthly minimum wage, currently at 751 euros, is to be reduced by 22 percent to 600 euros. It will be cut by an additional 10 percent for those aged under 25 in a bid to tackle youth unemployment, which stands at around 40 percent.
- The duration of collective labor contracts is to be restricted to three years. Thereafter, the terms of the contracts will apply for just three months, after which employers will be free to negotiate wages with workers.
- There will be no automatic pay rises until unemployment, now at 19-22 percent, falls below 10 percent.
- The document also foresees an end to permanent jobs for employees in public enterprises and state-controlled banks.
- Other measures are a 2 percent cut in social security contributions paid by employers and a 3 percent reduction in contributions to the Social Security Foundation (IKA).
- Supplementary pensions to be reduced by 15% but basic pensions also likely to be cut
- 15,000 public sector jobs to go by end of 2012
- Holiday bonuses, known as 13th and 14th month salaries, expected to be saved.
[/unordered_list]
More Q.E. On The Way For The UK…?
The Bank of England is expected to announce billions more in its quantitative easing programme. Economists widely expect another £50bn from the Bank when it announces its latest policy decision at noon on Thursday. That would take its quantitative easing programme to a total of £325bn. Needless to say traders need to exercise extreme caution today if trading cable.
Market Overview
European equity markers have risen for the first time in four days and the euro strengthened as regional Eurozone finance ministers prepared to meet for more talks on the Greek bailout. The cost of insuring against default has marginally increased.
The Stoxx Europe 600 Index had added 0.4 percent at 9:40 a.m. in London, while Standard & Poor’s 500 Index futures advanced less than 0.1 percent. The euro appreciated 0.3 percent to $1.3295. The yield on 10-year Spanish bonds rose 12 basis points. A gauge of commodities extended the longest winning streak since Dec. 27.
The MSCI Asia Pacific Index rose 0.1 percent to 126.71 at 6:07 p.m. in Tokyo after earlier slipping as much as 1 percent. Five stocks climbed for every four that fell. The gauge yesterday rallied 1.3 percent to a six-month high amid optimism a deal will be struck in Greece
Market snapshot at 10:30 am GMT (UK time)
Asia Pacific markets rallied after initial falls. Hong Kong’s Hang Seng Index fell less than 0.1 percent after earlier dropping as much as 1.1 percent. Japan’s Nikkei 225 Stock Average and Australia’s S&P/ASX 200 Index both closed 0.2 percent lower. South Korea’s Kospi Index increased 0.5 percent, erasing losses of as much as 1.3 percent, as the nation’s central bank held borrowing costs steady for an eighth month.
European bourse indices have been steadily up in the first part of the morning session with the ASE (Athens index) being up markedly. The STOXX 50 is up 0.41%, the FTSE is up 0.23%, the CAC is up 0.47%, the DAX is up 0.64% whilst the ASE is up 1.32%, up over 200 points, or a stunning 31% since the January low. ICE Brent crude is up $0.61 a barrel, Comex gold is up $4.10 an ounce. The SPX equity index future is down 0.07%.
Forex Spot Lite
The euro has strengthened for the third consecutive day versus the yen, climbing 0.5 percent. The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 0.4 percent, the greenback fell 0.1 percent versus the pound. The yen depreciated versus all but one of its 16 most traded counterparts. The euro has fallen 3.3 percent over the past three months, the worst performer among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The pound has lost 1.8 percent, the second-biggest decline.
The pound added 0.1 percent today to $1.5839 after losing 0.5 percent yesterday. The Aussie gained 0.1 percent to $1.0810. It climbed as high as $1.0845 yesterday, the most since Aug. 2.
