Greece close to bailout funds after austerity vote, but IMF warns on debt -as it happened

Graeme Wearden (until 1.45) and Nick Fletcher

from on 2016-05-23 17:21 (#1EP3G)

Greek bonds and shares are rallying on hopes that the eurozone will hand over billions in loans tomorrow

6.21pm BST

Here's our report on the IMF's Greek comments ahead of Tuesday's Eurogroup meeting. Larry Elliott writes:

The International Monetary Fund called for "upfront" and "unconditional" debt relief for Greece as it warned that without immediate action the financial plight of the recession-ravaged country would deteriorate dramatically over the coming decades.

In a strongly-worded assessment, the Fund said that there was no prospect of Greece meeting the draconian terms of its current bail-out plan and that debt interest payments on the soaring national debt would eat up 60% of the budget by 2060 in the absence of debt forgiveness.

5.44pm BST

Here's a link to the IMF report:

Ahead of Eurogroup on #Greece, @IMFNews explains how to do debt relief @YanniKouts @ekathimerini @KaterinaSokou https://t.co/UwyMAbqU0M

5.10pm BST

Despite the prospect of Greece finally receiving much needed bailout cash, most European markets have ended the day lower, with commodity stocks on the slide again. An imminent rise in US interest rates was one of the factors, helping lift the dollar and hitting metal and oil prices.

But Greece was an exception, with the Athens market up 1.5% and ten year bond yields falling to six month low. The final scores showed:

4.57pm BST

So, 18 hrs after Greece agrees to (finally, maybe) implement reforms, and 18 hrs before Eurogroup meets, the IMF puts its oar in the water?

4.52pm BST

More from the IMF staff report on Greece:

In all key policy areas-fiscal, financial sector stability, labor, product and service markets-the authorities' current policy plans fall well short of what would be required to achieve their ambitious fiscal and growth targets. Consequently, staff believes that a realignment of assumptions with the evident political and social constraints on the pace and scope of adjustment is needed, and it has revised the DSA assumptions for the primary balance and growth.

[The primary surplus] target would in staff's view be within the realm of what is plausible, although it remains ambitious in as much as it requires the fiscal adjustment to be underpinned by much stronger support for reforms and much stronger resolve by policy making institutions, in Greece and at the European level, than currently evident.

4.18pm BST

Two more US Federal Reserve members have added to the recent chorus suggesting a possible rate rise in June or July.

San Francisco Fed president John Williams indicated a rise would not be delayed much longer, despite risks such as the possibility of the UK voting to leave the European Union. Williams told reporters (quotes from Reuters):

[Brexit is] a factor in the decision for June obviously because you have an event right after, and we can obviously hold off until July if we wanted.

But of course we could also make a decision to raise rates at a meeting and if later on economic conditions for the US change, we can always move interest rates back down.

The Fed's Bullard and Williams reiterated the new more hawkish stance of the Fed, though data showing a bigger than expected fall in manufacturing activity didn't support their calls.

4.02pm BST

Greece's current policy plans fall well short of what is needed to achieve fiscal and growth targets, according to the International Monetary Fund.

In a staff report ahead of Tuesday's Eurogroup meeting, the IMF said Greece needs a substantial reprofiling of the terms of its European loans, and debt relief must be unconditional.

*IMF SAYS UPFRONT GREEK RELIEF MUST BE UNCONDITIONAL

IMF: SUGGEST MATURITY EXTENSIONS, DEFERRALS, FIXED INT FOR GREECE - MNI

IMF STAFF LOWERS GREECE LONG-TERM GROWTH ASSUMPTION TO 1.25% - IMF SAYS UPFRONT GREEK RELIEF MUST BE UNCONDITIONAL

3.14pm BST

Even before the growing signs that Greece may finally receive its long awaited bailout funds, eurozone consumer confidence improved for the second month in a row.

The May figure came in at -7.0 compared to -9.3 the previous month and better than the -9.0 which had been expected, according to the European Commission.

#Eurozone #consumer confidence encouragingly up for 2nd month & markedly in May to be at best level since Jan according to @EU_Commission

2.55pm BST

Here's something for the Fed to ponder as it wonders when to raise rates. The Markit provisional manufacturing PMI for May has fallen from a final 50.8 in April to 50.5. Analysts had been expecting a figure of 51.

This is the worst level for more than six years.

No US Q2 #manufacturing rebound in sight: Flash #PMI falls in May to lowest since Oct 2009 https://t.co/CQHd7F18sR pic.twitter.com/XK3pracQzC

2.48pm BST

Stock markets continue to drift, with Wall Street opening marginally higher while European shares slip back.

The Dow Jones Industrial Average is currently up just 10 points as investors hold fire ahead of further clues as to whether the US Federal Reserve will raise interest rates next month.

1.58pm BST

Here's a reminder of the breakdown of Greek debt, from the Financial Times:

Greek debt breakdown: when will it really pay back its creditors? https://t.co/wWDaJxepiE pic.twitter.com/MP7atEuoCf

#Greece's debt dilemma: A Cheat Sheet https://t.co/EJkKCaeHOI via @FT pic.twitter.com/zhzLufBe6p

1.26pm BST

Last summer, European officials worried that Greece might break off ties with Europe in favour of a new arrangement with Russia.

"[Putin] will meet Prokopis Pavlopoulos, the president of the Hellenic Republic, andPrime Minister Alexis Tsipras.

The summit talks are expected to dwell on key issues of bilateral trade, economic and investment interaction, including the implementation of joint energy and transport projects."

Putin to visit Greece on Friday. So no pressure on Eurogroup tomorrow, then

12.34pm BST

Here's the mood on the streets of Athens today after MPs approved the latest package of austerity measures:

Overheard on the tram:
"Wishing you good health!"
"Sure! Wishes are all we have that's still tax free!"#greece #greekcrisis #taxes

12.21pm BST

Campaigners are concerned that the plans for Greek debt relief are far too modest.

Eurozone finance ministers are due to discuss the issue tomorrow, and consider whether to extend the grace period on Greece's bonds and give Athens more time to repay.

"Greece needs a reduction in debt payments now to help tackle the humanitarian crisis in the country. A significant amount of debt needs to be cancelled, not just rescheduled, if the Greek economy is going to have the breathing space it needs to recover.

And the costs of cancelling the debt should be recovered from the real beneficiaries of bailout loans, including the German, French and British banks that lent recklessly to Greece in the first place."

11.52am BST

Despite today's rally, Greek debt is still pretty risky:

#Greece's bond yields fall, but default risk remains huge (>60%). pic.twitter.com/6rsXpVxRiW

11.46am BST

Here's some other developments across business this morning:

Related: Bayer bids $62bn for Monsanto

11.32am BST

Angela Merkel and Alexis Tsipras have held their meeting in Istanbul:

II...IIIIIIfI I1/4I III III^3IIIIII^1I IIIIII IfII IIII^1IIII^1I III II...IIIII... III IIIIfIIIII^1IIIIIIII. #WorldHumanitarianSummit pic.twitter.com/9P77OskHOk

11.27am BST

Back in the markets, money is pouring into short-dated Greek bonds.

The yield on Greece's two-year debt has fallen to 8.5%, down from 9.5% on Friday night.

10.50am BST

Greek media are reporting that prime minister Tsipras will meet with German chancellor Angela Merkel shortly, in Istanbul.

#Greece Tsipras tete-a-tete meeting with Merkel at 1 o'clock in Istanbul, a day before the #Eurogroup

Having adopted an open-door policy towards Syrian refugees in 2011, we now host nearly 3 million Syrian nationals from diverse ethnic, religious and sectarian backgrounds.

In the past five years Turkey has allocated $10bn to provide Syrian refugees with free healthcare, education and housing. At a time when the international community failed the Syrian people - 600,000 of whom have lost their lives in the civil war, with 13 million forced from their homes - Turkey, along with the rest of Syria's neighbours, was left to deal with the conflict's consequences. As the Syrian civil war enters its sixth year, we are calling on the world to create a fair mechanism for sharing the burden.

10.27am BST

EU Economic Affairs commissioner Pierre Moscovici has welcomed Greece's decision to approve further austerity measures last night, despite public opposition.

"A key step has been taken... towards the conclusion of the first stage of the Greek programme," Moscovici said in Paris, a day after Greek lawmakers voted in favour of spending cuts and tax hikes.

Eurozone finance ministers are set to discuss easing Greece's debt burden and disbursing the next round of funds at a closely-watched Eurogroup meeting in Brussels on Tuesday.

9.54am BST

Bloomberg are reporting that eurozone finance ministers are planning to hand Greece a11bn of bailout funds tomorrow.

That's according to a draft version of tomorrow's eurogroup statement, seen by the newswire:

BREAKING; #Greece to get a11bn loan tranche after review completion, reveals draft - @business

#Greece to get a11bn loan tranche after review completion, a3.8bn for arrears clearance, a7.2b to cover debt service needs, BBG reports.

9.42am BST

Greek banks are among the best-performing shares in Athens this morning:

9.31am BST

Greek government bonds have hit their highest level in six months, after MPs approved last night's austerity package.

9.18am BST

This slowdown in Eurozone growth rather undermines critics of the European Central Bank's stimulus measures.

So suggests Carsten Brzeski of Dutch bank ING:

Bad news for all claiming that the ECB is too dovish: Eurozone PMI drops to 16-month low.

9.09am BST

Ouch. Growth across Europe's private sector has slowed to a sixteen-month low.

The eurozone composite PMI calculated by Markit, just released, has inched down to 52.9 from 53.0 in April.

"There are signs of improving life in the 'core' countries of France and Germany, led mainly by their service sectors, as manufacturing continued to struggle. However, elsewhere the rate of expansion slowed to its weakest for almost one-and-a-half years.

"The survey therefore paints a picture of a region stuck in a low-growth phase, managing to eke out frustratingly modest output and employment gains despite various ECB stimulus 'bazookas', a competitive exchange rate and households benefitting from falling prices."

8.50am BST

Europe's stock markets are suffering a dose of Monday morning blues.

The main indices are all down, amid disappointment that global finance ministers didn't take any decisive action at their G7 meeting over the weekend.

The weekend's G7 meeting wrapped up with a lack of consensus and this appears to be very much setting the pace right now.

George Osborne groped by the Governor of the Bank of Japan. https://t.co/nsnkvRFIgJ pic.twitter.com/hzTILT2NST

8.38am BST

May is also looking like a good month for German companies.

Markit reports that growth across Germany's private sector has hit a three-month high.

Flash #Germany Composite #PMI Output Index rises to 5-month high of 54.7 (53.6 in April) https://t.co/cBdLZIh80B pic.twitter.com/IW1hxh0PCp

8.28am BST

Good news from France....its private sector is growing at the fastest rate in seven months.

*FRANCE MAY SERVICES PMI RISES TO 51.8; FORECAST 50.6

*FRANCE MAY MANUFACTURING PMI RISES TO 48.3; FORECAST 49

Surprisingly strong performance of the French private sector despite strikes and uncertainty. Output, new business, jobs, prices all up.

8.08am BST

Last night's vote wasn't without incident. One government MP, Vassiliki Katrivanou, refused to back parts of the package, saying Greece's lenders were taking too much control.

Katrivanou has now resigned, meaning she can be replaced as an MP - leaving Tsipras's narrow majority of 155 MPs, out of 300, intact.

7.59am BST

Greek prime minister Alexis Tsipras cut a defiant figure at last night's vote.

"Greeks have already paid a lot, but this is probably the first time that the possibility of these sacrifices being the last is so evident....

"European leaders will receive a message tonight, that Greece fulfils its obligations. Tomorrow, the other side must also take responsibility."

"It's a disaster! We will cut down on everything, from food to driving."

7.42am BST

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

Greece is on the brink of receiving a much-needed dose of bailout, after its parliament agreed to the latest batch of austerity measure to be piled on its already weakened economy.

The belt-tightening legislation, outlined in a 7,500-page omnibus bill, includes measures that range from the taxation of coffee and luxury goods to the creation of a new privatisation fund in charge of real estate assets for the next 99 years. Under the stewardship of EU officials, the body will oversee the sale of about 71,500 pieces of prime public property in what will amount to collateral for the a250bn in bailout loans Greece has received since 2010.

"They are with the exception of the Acropolis selling everything under the sun," said Anna Asimakopoulou, the shadow minister for development and competitiveness. "We are giving up everything."

Our European opening calls:$FTSE 6161 up 4
$DAX 9916 up 0
$CAC 4343 down 11$IBEX 8779 up 8$MIB 17442 down 371

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