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Debt campaigners criticise IMF over Greek deal - live updates Debt campaigners criticise IMF over Greek deal - live updates
(35 minutes later)
11.19am BST
11:19
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 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.”
11.12am BST
11:12
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/16jYZ4CrCu
11.05am BST
11:05
Varoufakis: Greek deal is more 'extend and pretend'
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/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.
That approach died after the Greek people voted to reject creditors demands’, only for prime minister Tsipras to sign up to the third bailout.
10.53am BST
10:53
If you missed the Greek agreement, it’s online here:
The #Eurogroup statement on #Greece https://t.co/D8lU2f5zjz
10.46am BST
10:46
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.
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.
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.
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 unanswered
10.17am BST10.17am BST
10:1710:17
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
10.12am BST10.12am BST
10:1210:12
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.
UpdatedUpdated
at 10.32am BSTat 10.32am BST
10.06am BST10.06am BST
10:0610:06
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
8.59am BST8.59am BST
08:5908:59
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.”
UpdatedUpdated
at 9.05am BSTat 9.05am BST
8.58am BST8.58am BST
08:5808:58
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
8.47am BST8.47am BST
08:4708:47
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.
8.45am BST
08:45
Greek bond yields hit six-month low
Greek government bonds are on an absolute tear this morning, as fears of a disorderly default fade away.
The country’s 10-year bonds are rallying hard, driving down the interest rate (or yield) on the debt below 7% for the first time since last November.
That’s an important sign – 7% is traditionally the level where a country’s debts are unaffordable.
So investors are calculating that this agreement is significant, despite the doubts and question marks.
#Greece's 10y yields drop below 7% for first time since Nov after deal w/ creditors. pic.twitter.com/Uc8QEm0mAg
8.40am BST
08:40
Henrik Enderlein, director of the Jacques Delors Institute, sums up the deal:
They're still kicking the can down the road on #Greece, even if they're now kicking in the right direction.
8.38am BST
08:38
Dijsselbloem: Deal is a really important step
After a few hours sleep, Eurozone ministers are returning to the Justis Lipsius building for a full Ecofin meeting with EU ministers.
They won’t be discussing Greece - instead, they’ll be debating an anti tax avoidance Directive.
Commissioner Pierre Moscovici just shared a touching embrace with Eurogroup president Jeroen Dijsselbloem.
A cheerful-sounding Dijsselbloem then says that last night’s agreement with Greece is a “really important step”.
All sides realised we had to get a deal, he says, even though we all realised it would be difficult.
The IMF was asking a lot, and we were asking a lot of Greece.
But the deal brings the IMF on board, strengthens confidence between all sides, and thus should improve confidence within the eurozone.
Q: So are we 100% sure that the IMF will be on board?
No, Dijsselbloem says. The Fund must conduct its own debt sustainability analysis, and the final decision is up to its board.
8.28am BST
08:28
Analyst: Next Greek crisis will along soon
Marc Ostwald of City firm ADM Investor Services is also underwhelmed by the deal:
This is another to be sorted under ‘can kicking’, leaving any decision on genuine debt relief until 2018, after the French and German elections, but also not creating any precedents or short-term crises which might influence the Italian municipal elections on June 5, the UK Brexit referendum on June 23 or the Spanish election on June 26.
It also continues to impose austerity measures which will continue to strangle the Greek economy, per se ensuring that the next crisis moment in the Greek saga will not be far away.
8.27am BST
08:27
Stock markets hit three-week highs
European stock markets have jumped in early trading.
The news that Greece will finally receive the €10bn bailout tranche is easing concerns of another eurozone financial crisis over the summer, on top of Britain’s EU referendum.
In London, the FTSE 100 has swiftly gained 40 points, or 0.6%, to 6255. That’s its highest level since May 3rd. Germany’s DAX has gained 0.8%.
8.19am BST
08:19
Peter Spiegel, the FT’s former Brussels bureau chief, isn’t completely convinced by the agreement.
So #Greece & #IMF have fallen for German promises of future debt relief...again? Nov 2011, July 2015, now 2018...won't be holding my breath
8.16am BST
08:16
Last night’s deal may not be perfect, but it appears to ‘kick the can’ down the road until after France and Germany have gone to the polls in 2017.
Analysts at RBC Capital Markets explain:
€7.5bn will be released in June that will allow Greece cover maturing IMF and ECB loans in June and July and begin to clear arrears which have built up as the review process has stalled. The outstanding portion of the payment will then be made after the summer. There was also agreement on a roadmap for Greek debt relief. In the short term this is mainly through managing the interest rate and repayment profile of euro area loans. Further out, there was commitment on further measures once the programme is completed in 2018.
While not quite the unconditional debt relief the IMF had called for in its assessment of Greece’s debt sustainability, the measures are sufficient for the Fund to stay involved in the programme although that will still have to be formally approved by the IMF board.
The deal means that Greece should now be ‘parked’ until after next year’s German general and French presidential elections but, equally important, any decision on Greek debt relief won’t have to be taken in the German parliament until after the next autumn’s vote.
8.13am BST
08:13
Eurozone government debt surges after Greek deal.
Money is pouring into government debt issued by the eurozone’s weaker members this morning, as investors react to Greece’s debt real.
This has driven down the yield (or interest rate) on peripheral government bonds -- a sign that traders are happy to buy these riskier assets.
Reuters has the details:
Portugal’s 10-bond yield fell 4.8 basis points to a three-week low at 3.02%, while Spanish and Italian 10-year bond yields fell to one-month lows at around 1.51% and 1.40% respectively.
“The agreement between Greece and its creditors is positive for risk sentiment and in turn peripheral bond markets,” said Rene Arecht, a derivatives market analyst at DZ Bank.
I imagine we’ll also see a rally when the Greek stock and bond markets open shortly....
8.01am BST
08:01
Full Story: IMF makes concessions
Our Brussels correspondent, Jennifer Rankin, explains how the IMF has backed down over its demands for immediate Greek debt relief:
European officials have agreed to unlock €10.3bn in bailout money for Greece as the International Monetary Fund made a significant climbdown in its demand for upfront debt relief for the recession-hit country.
Greece’s international creditors emerged from an 11-hour meeting in Brussels at 2am on Wednesday having agreed on steps to ease the burden of Greece’s €321bn (£245bn) debt mountain, worth 180% of annual economic output.
But the debt relief plan was a far cry from the “upfront” and “unconditional” debt relief the IMF had demanded on Monday, when it warned that Greece would face an ever-growing bill to service its loans. Poul Thomsen, director of the IMF’s European programme, said the IMF had made “a major concession”. “We had argued that [debt relief measures] should be approved up front and [now] we have agreed that they should be made at the end of the programme period.
Here’s her full dispatch from Brussels, a few hours ago:
Related: Eurozone unlocks €10.3bn bailout loan for Greece
7.46am BST
07:46
The agenda: Greece finally gets a deal
Good morning.
There’s a sense of relief in the eurozone this morning after Greece and its creditors finally hammered out a deal to unlock €10bn in bailout funds, and trigger work on debt relief.
After a lengthy meeting, which we liveblogged through the night, ministers emerged to report that a breakthrough had been reached.
Both sides appear to have given some ground to get the deal onto the table.
One the one hand, all creditors have agreed that Greece’s debt mountain is unsustainable – suggesting Germany has given up some ground.
On the other, debt relief isn’t as immediate or concrete as the International Monetary Fund has been demanded, meaning the Fund has made concessions too.
Related: Eurozone reaches breakthrough on Greek bailout and debt relief - as it happened
If you were snoozing during the action, here’s the key points:
1) Greece has finally received the green light to receive more than €10bn in bailout funds, easing concerns that it could face financial peril this summer.
A few prior actions do remain, concerning pensions and privatisations, but once that is resolved, the money will flow -- starting with €7.5bn in June.
Eurogroup president Jeroen Dijsselbloem told reporters that Greece’s programme was back on track.
“We achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme....
This is stretching what I thought would have been possible not so long ago.”
2) In an important development, the International Monetary Fund has signalled that it could join the bailout. That could happen by the end of 2016.
However, the IMF’s European chief Poul Thomsen insisted that the Fund must check that the eurozone is offering substantial debt relief.
In a rare public appearance, Thomsen said:
We welcome that all stakeholders recognise that Greek debt is unsustainable. We welcome that it is understood that Greece needs debt relief to make it sustainable.
3) Eurozone ministers have agreed to “a package of debt measures” to make Greece’s debts sustainable.
That will start with short-term tweaks to Greece’s debts, to smooth out its obligations.
Medium-term measures are also promised, although not until 2018, which looks like a concession from the IMF.
There is also a commitment to consider whether further restructuring will be needed once the bailout ends, assuming Athens sticks to the programme and everything works out. However, this doesn’t appear to be as comprehensive, wide-ranging and unconditional as the IMF has been demanding.
4) The deal has been generally welcomed by Greece’s finance minister. Euclid Tsakalotos said it would help end the country’s vicious circle of austerity and recession.
Donald Tusk, the head of the European Council, said the Greek deal was good for the global economy.
Slovakia’s finance minister Peter Kazimir also sounded satisfied, comparing the negotiations to “a complicated birth”.
And France’s Michel Sapin was positively upbeat, saying the deal was “first and foremost a declaration of confidence in today’s Greece.”
But that was last night. Now that people have slept on it (however briefly), we should get some proper reaction.
Updated
at 7.53am BST