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Debt campaigners criticise IMF over Greek deal - live updates Debt campaigners criticise IMF over Greek deal - live updates
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The Greek agreement is part of a broader strategy to avoid rocking the boat until Britain’s EU referendum is over, argues my colleague Jonathan Freedland.
He writes:
Whatever the rights and wrongs of the [Greek] austerity argument, Cameron has wanted the issue to go away – at least for another month. Today’s bailout loan has achieved that.
Related: The Greek bailout shows the EU is on its best behaviour – until 24 June | Jonathan Freedland
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Moody's: Greek deal is credit positiveMoody's: Greek deal is credit positive
Rating agency Moody’s has just announced that the Greek deal is “credit-positive”.Rating agency Moody’s has just announced that the Greek deal is “credit-positive”.
Moody’s says the promise of €10.3bn of bailout loans alleviates the danger that the country defaults this summer.Moody’s says the promise of €10.3bn of bailout loans alleviates the danger that the country defaults this summer.
It also welcomes the “road map” on debt relief agreed by creditors, although it is light on details.It also welcomes the “road map” on debt relief agreed by creditors, although it is light on details.
Although the announcement doesn’t provide specifics on the type of relief, it is clear that material relief will be considered only after the program expires in 2018 and remains contingent on the Greek governments’ ability to implement successfully the conditions associated with the program.Although the announcement doesn’t provide specifics on the type of relief, it is clear that material relief will be considered only after the program expires in 2018 and remains contingent on the Greek governments’ ability to implement successfully the conditions associated with the program.
However, the agency is also concerned that Athens will struggle to implement the measures agreed with creditors.However, the agency is also concerned that Athens will struggle to implement the measures agreed with creditors.
We consider implementation risks in Greece to remain high, given the small governing majority, weak institutions, and the backdrop of political and social discontent.”We consider implementation risks in Greece to remain high, given the small governing majority, weak institutions, and the backdrop of political and social discontent.”
It's official: Can-kicking = good https://t.co/oDAY6oQxrAIt's official: Can-kicking = good https://t.co/oDAY6oQxrA
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Mihir Kapadia, CEO at Sun Global Investments, is relatively upbeat about the deal:Mihir Kapadia, CEO at Sun Global Investments, is relatively upbeat about the deal:
The Eurozone provided Greece with a firm offer of debt relief yesterday at a meeting of finance ministers in Brussels, a decision which could see the Euro provide €10bn in new funds for the country. The IMF seems to have softened its stance significantly from its hard line position as it had previously insisted that Greece’s proposed programme did not offer a path to fiscal sustainability.The Eurozone provided Greece with a firm offer of debt relief yesterday at a meeting of finance ministers in Brussels, a decision which could see the Euro provide €10bn in new funds for the country. The IMF seems to have softened its stance significantly from its hard line position as it had previously insisted that Greece’s proposed programme did not offer a path to fiscal sustainability.
The positive conclusions to these talks are a good sign on a number of fronts – showing flexibility by the IMF and European ministers, and some early signs of improving confidence in Greece. Greek 10-year bond yields fell below 7% this morning for the first time since November 2015.”The positive conclusions to these talks are a good sign on a number of fronts – showing flexibility by the IMF and European ministers, and some early signs of improving confidence in Greece. Greek 10-year bond yields fell below 7% this morning for the first time since November 2015.”
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We’re going to need a new metaphor....We’re going to need a new metaphor....
It buys everybody time, albeit expensive time (over 10 billion euros) until September. Kicking the can down the road https://t.co/16jYZ4CrCuIt buys everybody time, albeit expensive time (over 10 billion euros) until September. Kicking the can down the road https://t.co/16jYZ4CrCu
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Varoufakis: Greek deal is more 'extend and pretend'Varoufakis: Greek deal is more 'extend and pretend'
Yanis Varoufakis, Greece’s former finance minister, has given the deal the thumbs-down:Yanis Varoufakis, Greece’s former finance minister, has given the deal the thumbs-down:
New supercharged, mututally-reinforcing austerity/recession & no debt relief – another extend-and-pretend Eurogroup https://t.co/6Qgy8CFOLDNew supercharged, mututally-reinforcing austerity/recession & no debt relief – another extend-and-pretend Eurogroup https://t.co/6Qgy8CFOLD
A year ago, Varoufakis was doing battle with the eurogroup on a weekly basis (at least, that’s how it felt), trying to persuade fellow ministers to abandon their push for austerity packages laden with tax rises.A year ago, Varoufakis was doing battle with the eurogroup on a weekly basis (at least, that’s how it felt), trying to persuade fellow ministers to abandon their push for austerity packages laden with tax rises.
That approach died after the Greek people voted to reject creditors demands’, only for prime minister Tsipras to sign up to the third bailout.That approach died after the Greek people voted to reject creditors demands’, only for prime minister Tsipras to sign up to the third bailout.
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If you missed the Greek agreement, it’s online here:If you missed the Greek agreement, it’s online here:
The #Eurogroup statement on #Greece https://t.co/D8lU2f5zjzThe #Eurogroup statement on #Greece https://t.co/D8lU2f5zjz
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The Financial Times has a good word to describe the Greek deal - “messy”.The Financial Times has a good word to describe the Greek deal - “messy”.
And that’s because the really sticky issue, of how to make Athens’ debts sustainable, has been kicked down the road. Although the creditors have made commitments, the agreement released in the early hours of this morning is light on detail.And that’s because the really sticky issue, of how to make Athens’ debts sustainable, has been kicked down the road. Although the creditors have made commitments, the agreement released in the early hours of this morning is light on detail.
Mehreen Khan and Alex Barker sum it up:Mehreen Khan and Alex Barker sum it up:
The ambiguities are legion. A target was set to maintain Greece’s gross financing needs at no more than 15 per cent of national income until 2030. And measures were outlined to do that, including maturity extensions and a possible buyout of IMF loans in 2018. The caveat: no numbers were agreed on what relief the measures would actually deliver.The ambiguities are legion. A target was set to maintain Greece’s gross financing needs at no more than 15 per cent of national income until 2030. And measures were outlined to do that, including maturity extensions and a possible buyout of IMF loans in 2018. The caveat: no numbers were agreed on what relief the measures would actually deliver.
And while the IMF dropped its most ambitious debt relief demands — including the need for them to be automatic when Greece exits its programme in 2018 — there was a big caveat. To participate financially in the programme before the end of the year, the IMF would need to approve a new debt sustainability analysis (DSA) on Greece that would meet its normal lending standards.And while the IMF dropped its most ambitious debt relief demands — including the need for them to be automatic when Greece exits its programme in 2018 — there was a big caveat. To participate financially in the programme before the end of the year, the IMF would need to approve a new debt sustainability analysis (DSA) on Greece that would meet its normal lending standards.
For Germany too, the deal amounted to a trade-off. Wolfgang Schäuble, German finance minister, met his two main red lines: no haircuts and no Bundestag votes before the German federal elections in 2018.For Germany too, the deal amounted to a trade-off. Wolfgang Schäuble, German finance minister, met his two main red lines: no haircuts and no Bundestag votes before the German federal elections in 2018.
But to secure the IMF’s political participation, he made a concession: an implicit commitment to meeting a DSA that will be hard to retreat from. And language was softened on the requirement for Greece to meet a 3.5 per cent budget surplus target for at least the next 10 years; this would now be reviewed in 2018.But to secure the IMF’s political participation, he made a concession: an implicit commitment to meeting a DSA that will be hard to retreat from. And language was softened on the requirement for Greece to meet a 3.5 per cent budget surplus target for at least the next 10 years; this would now be reviewed in 2018.
More here: Messy Greek debt deal leaves key questions unansweredMore here: Messy Greek debt deal leaves key questions unanswered
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In another reassuring signal from the markets, the yield on 2-year Greek bonds has tumbled below the 10-year bond yield.In another reassuring signal from the markets, the yield on 2-year Greek bonds has tumbled below the 10-year bond yield.
Why does that matter? Because it means investors are now rating Greece’s short-term debt as less risky than its longer-term borrowings.Why does that matter? Because it means investors are now rating Greece’s short-term debt as less risky than its longer-term borrowings.
That’s how markets usually operate -- but for months Greece’s two-year yields (which rise when prices fall) have soared over the 10-year yield. Why? Because if Greece can’t repay its debts, it will default on shorter-dated bonds first.That’s how markets usually operate -- but for months Greece’s two-year yields (which rise when prices fall) have soared over the 10-year yield. Why? Because if Greece can’t repay its debts, it will default on shorter-dated bonds first.
This chart, from Reuters’ John Geddie, explains all:This chart, from Reuters’ John Geddie, explains all:
Greek bond curve normalises -- 2yr below 10yr yields for first time since March -- in sign of default fears easing pic.twitter.com/GTKpchZX1gGreek bond curve normalises -- 2yr below 10yr yields for first time since March -- in sign of default fears easing pic.twitter.com/GTKpchZX1g
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Although the London market is at a three-week high, City investors do recognise that the details of Greece’s debt relief are still up in the air.Although the London market is at a three-week high, City investors do recognise that the details of Greece’s debt relief are still up in the air.
Joshua Mahony of IG explains:Joshua Mahony of IG explains:
Eurozone discussions finally reached a conclusion regarding the restructuring of Greek debt, yet the outcome was far from constructive as ministers decided to kick the can by simply resume talks after the French and German elections.Eurozone discussions finally reached a conclusion regarding the restructuring of Greek debt, yet the outcome was far from constructive as ministers decided to kick the can by simply resume talks after the French and German elections.
This issue will drag on for years and there is a feeling that the Greeks will say whatever they need to in order to get a good deal. With austerity crippling the Greek economy, the hopes of it standing on its own two feet and paying back its debts anytime soon seem negligible.This issue will drag on for years and there is a feeling that the Greeks will say whatever they need to in order to get a good deal. With austerity crippling the Greek economy, the hopes of it standing on its own two feet and paying back its debts anytime soon seem negligible.
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Robin Bew of the Economist Intelligence Unit is also concerned about Greece’s debt mountain, which is currently 180% of GDP.Robin Bew of the Economist Intelligence Unit is also concerned about Greece’s debt mountain, which is currently 180% of GDP.
Unclear who blinked first on #Greece bailout. #Eurozone of #IMF. Greece gets its cash but no mutually acceptable solution to debt overhangUnclear who blinked first on #Greece bailout. #Eurozone of #IMF. Greece gets its cash but no mutually acceptable solution to debt overhang
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IMF criticised over Greek climbdownIMF criticised over Greek climbdown
The International Monetary Fund is coming under fire from debt campaigners this morning.The International Monetary Fund is coming under fire from debt campaigners this morning.
They’re disappointed that the Fund has abandoned its commitment to “upfront” Greek debt relief as part of last night’s deal.They’re disappointed that the Fund has abandoned its commitment to “upfront” Greek debt relief as part of last night’s deal.
Instead, medium-term debt relief will only kick in around 2018 - and the details are stillInstead, medium-term debt relief will only kick in around 2018 - and the details are still
Sarah-Jayne Clifton, Director of the Jubilee Debt Campaign, says this isn’t acceptable:Sarah-Jayne Clifton, Director of the Jubilee Debt Campaign, says this isn’t acceptable:
“IMF staff are proposing to lend more money to Greece without the upfront and unconditional debt relief they called for. This is a major climb down, which once again breaks the IMF’s own rules not to lend when they know a debt cannot be paid.“IMF staff are proposing to lend more money to Greece without the upfront and unconditional debt relief they called for. This is a major climb down, which once again breaks the IMF’s own rules not to lend when they know a debt cannot be paid.
Last night, the IMF’s Poul Thomsen agreed that the Fund had made a ‘major concession’, in order to reach a deal.Last night, the IMF’s Poul Thomsen agreed that the Fund had made a ‘major concession’, in order to reach a deal.
In return, all creditors agreed that Greece’s debts are unsustainable, paving the way to debt relief over time.In return, all creditors agreed that Greece’s debts are unsustainable, paving the way to debt relief over time.
Clifton though, insists that action is needed now.Clifton though, insists that action is needed now.
“Eurozone finance ministers cannot keep repeating this pattern of sticking plaster measures followed by near defaults and all night crisis meetings for the next 40 years. Only significant cancellation of Greece’s debt now, including payments coming due now such as to the IMF and ECB, will help tackle the humanitarian crisis in the country and restore the lack of confidence which is holding back Greece and the wider European economy.”“Eurozone finance ministers cannot keep repeating this pattern of sticking plaster measures followed by near defaults and all night crisis meetings for the next 40 years. Only significant cancellation of Greece’s debt now, including payments coming due now such as to the IMF and ECB, will help tackle the humanitarian crisis in the country and restore the lack of confidence which is holding back Greece and the wider European economy.”
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Economist Megan Greene, of asset management firm Manulife, says Berlin appears to have won last night’s Tussle in Brussels:Economist Megan Greene, of asset management firm Manulife, says Berlin appears to have won last night’s Tussle in Brussels:
Summary of Eurogroup: Germany always wins, IMF caves under pressure from Germany and US, no one does what's in Greece's best interestsSummary of Eurogroup: Germany always wins, IMF caves under pressure from Germany and US, no one does what's in Greece's best interests
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Greece’s stock market has jumped by 1.4% in early trading, led by bank stocks.Greece’s stock market has jumped by 1.4% in early trading, led by bank stocks.