NEW YORK (AP) — Stocks fell in the United States and Europe on Tuesday as investors worried that a deal to cut Greece's national debt and hold off a possible financial crisis might fall through.
The Dow Jones industrial average was down 49 points at 12,660 just after 2 p.m. EST. It has risen or fallen less than 100 points in 13 straight trading sessions, the longest stretch of calm since March and April of last year.
Treasury prices rose Tuesday from their lowest levels this year on uncertainty about whether Greece will reach a deal with its creditors. That drew money back into safer investments.
In Europe, Greece's stock market index fell 5.5 percent. Stocks fell less than 1 percent in Germany, France and Spain.
TORONTO (Reuters) - Canada's dollar weakened against the U.S. currency on Tuesday, pulled lower with the euro and commodity prices as a setback in the latest efforts to restructure Greek debt triggered fresh worries about the stability of the euro zone economy.
Athens needs a deal very soon to ensure it can get its hands on funds from a 130-billion-euro rescue plan drawn up by its European partners and the International Monetary Fund. It needs the money before 14.5 billion euros of bond redemptions come due in March.
The market has already priced in an orderly default whereby private stakeholders would take a 50- to 70-percent haircut on their Greek debt holdings, said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.
"When talks break down you get a little bit more concerned that things aren't going to evolve that way and you get the chance of a disorderly default coming back on the table," he added.
Economic ruin on the horizon for Greece: Germany cast doubts on saving country from financial meltdown
January 26, 2012 – GREECE - Angela Merkel has cast doubt for the first time on Europe’s chances of saving Greece from financial meltdown and sovereign default, conceding that Europe’s first ever multibillion euro bailout coupled with savage austerity was not working after a two-year crisis that has brought the single currency to the brink of unraveling. In an interview with the Guardian and five other leading European newspapers, the German chancellor also insisted – against widespread resistance elsewhere in the eurozone and in the UK – that the European court of justice (ECJ) be empowered to police public spending and budget policies of the 17 countries in the euro. She also called for the eventual creation of a European political union, with many more national powers ceded to a central government, a strengthened bicameral European parliament, and the ECJ assuming the role of Europe’s Supreme Court. Days before the latest EU summit, which, at Merkel’s insistence and evoking scant enthusiasm elsewhere, is to finalize an international treaty between eurozone governments entrenching German-style fiscal and budgetary rigor in all single currency countries, the chancellor admitted having doubts about the strategy she had pursued during the crisis. “We haven’t overcome the crisis yet. Of course, there’s Greece, a special case where, despite all the efforts that have been made, neither the Greeks themselves nor the international community have yet managed to stabilize the situation.” Asked about the European response over the past two years, during which Berlin has often dictated terms and encountered strong resistance in Brussels, Paris, and at the European Central Bank in Frankfurt, Merkel said: “Good politicians always have doubts, as a way of constantly reviewing whether they are on the right track.” There were no doubts about her aim – to save the euro and preserve the EU. The reservations concerned the means to those ends. With Europe’s biggest ever crisis moving into its third year, the chancellor is facing growing resistance to her key aim at Monday’s summit – finalizing the “fiscal compact” treaty that is the euro’s new rulebook, foreseeing quasi-automatic fines for fiscal sinners, empowering the Luxembourg-based ECJ to sit in judgment of the 17 countries’ budgets, and establishing legally binding debt ceilings for eurozone governments. –Guardian
After weeks of wrangling over the coupon, or interest rate, Greece must pay on new bonds it will swap for existing debt, attention has shifted to whether the ECB and other public creditors will follow private bondholders in swallowing losses.
A day after International Monetary Fund chief Christine Lagarde said the ECB may need to accept losses on its Greek holdings, the European Union's top economic official also warned more public money will be needed to make up a shortfall in the country's second bailout.
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The ECB, which owns roughly 40 billion euros worth of Greek bonds, is no closer to agreeing on whether or not it will take losses on the Greek bonds it owns after a late night Wednesday meeting, euro zone central bank sources told Reuters.
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So far the coupon on the new bonds had been the main stumbling block in the negotiations.
On Monday, euro zone ministers rejected the creditors' offer of a 4 percent coupon on new bonds after Greece and its EU/IMF lenders held out for a 3.5 percent interest rate. They want the lower coupon to ensure the country's debt falls to a target of 120 percent of GDP by 2020, from around 160 percent now.
A second source familiar with the negotiations said the "coupon is parked for current time until we can get closer on detail of the overall package". Asked if that would include the ECB, the source said: "We would expect it to, still to be determined though."
ATHENS (Reuters) - The European Union and IMF want Greece to push through more budget cuts and implement a series of long-agreed austerity reforms before they agree on a new bailout the country needs to avert bankruptcy, a report obtained by Reuters shows.
All eyes have been on Athens' tortuous debt swap talks with its private creditors over the past week, but Greece also needs to convince its euro zone partners and the International Monetary Fund to release a 130-billion euro package if it is to avoid a chaotic default.
Athens' partners have grown increasingly exasperated with its repeated fiscal slippages and delays on reforms and want to see progress before they wrap up Greece's second multi-billion euro bailout in three years.
The EU, IMF and ECB lenders - known as the troika - have drawn up a report this week which includes a list of measures they want to see enacted by Athens.
Talks with EU, IMF and ECB inspectors on the new bailout program are expected to go well into next week, sources close to the talks say, with slow process so far on fleshing out reforms required by the lenders on areas such as cutting the public sector workforce and making wage rules in the public and private sector more flexible.
Looming elections are distracting senior Greek officials and politicians from enacting the unpopular austerity reforms.
Greece's co-ruling conservative New Democracy party wants snap elections as a new bailout deal is clinched and no later than April 8.
Greece and its private creditors made progress on Thursday in talks on restructuring its debt, both sides said, and they will continue negotiating on Friday with the aim of sealing an agreement within a few days. There was no set time yet for Friday's meetings.
January 28, 2012 — NEW YORK (AP) — Remember Greece?
It's been two years since a financial crisis erupted in the birthplace of drama, and the final act is still unfinished. A second week of talks in Athens ended Friday with no deal between the country, the European Union and private holders of Greek bonds.
Remarkably, even after the crisis became such an international worry last year that the leaders of France and Germany were actually referred to as "Merkozy," the European debt bomb could still explode, with Greece as the fuse.
Economists and investors see a Greek default as the biggest test of the world financial system since the crisis that followed the collapse of Lehman Brothers investment house in 2008. It is also the biggest threat to what has been a successful start to the year in the U.S. stock market. The Standard & Poor's 500 index has gained 4.7 percent, roughly half its average for a full year, in just four weeks.
"If talks break down next week and it looks like they can't reach a deal, it raises all sorts of risks," says Jeffrey Kleintop, chief market strategist at LPL Financial. "The stock market could probably lose half its gains for the year."
On paper, it's hard to see how Greece could take down financial markets in the U.S., the world's biggest economy, with $15.2 trillion in goods and services churned out every year. Consider: — Greece's economy weighs in at euro220 billion, according to the International Monetary Fund's estimates. That translates to $285 billion, which puts Greece's economy on par with Maryland's. The U.S. sells about $1.6 billion in weapons, medicine and other products to Greece each year, a minuscule 0.07 percent of exports.
BERLIN (Reuters) - Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday.
"There are internal discussions within the Euro group and proposals, one of which comes from Germany, on how to constructively treat country aid programs that are continuously off track, whether this can simply be ignored or whether we say that's enough," the source said.
The source added that under the proposals European institutions already operating in Greece should be given "certain decision-making powers" over fiscal policy.
"This could be carried out even more stringently through external expertise," the source said.
ATHENS, Greece (AP) — Greek authorities say an earthquake with preliminary 4.9-magnitude has shaken the country's southern Aegean islands, including Crete. No injuries or damage were immediately reported in the quake, which was the third in three days in the area.
The Athens Geodynamic Institute says the undersea earthquake occurred at 12:50 p.m. (1050 GMT) Saturday about 243 kilometers from the Greek capital, Athens, between the islands of Santorini and Crete. It says the earthquake occurred at a depth of 31 kilometers.
Earthquakes of magnitude 5.3 and 5.2 occurred in the same area on Thursday and Friday, respectively.
Greece is in one of the world's seismically active areas, with hundreds of quakes occurring each year
Perhaps I am mistaken but I do not see any chance Greece will agree with this proposal.
German and IMF demands make meaningless any hint of a deal "soon". Germany has signaled it has had enough and will not throw another 130 billion euros down a rathole. The IMF signaled the same thing but not as emphatically.
Thus, if Germany does not back down and the IMF insists on a 10-page list of “prior actions” a Greek exit from the Eurozone is at hand.
The finance minister of debt-stricken Greece on Sunday rejected a proposal from Germany for the EU to take control over its tax and spend decisions, citing national sovereignty.
"Whoever hands people a dilemma between financial aid and national dignity is ignoring basic historical teaching," said Evangelos Venizelos on the eve of an EU summit on the eurozone debt crisis in Brussels.
In a statement released as he left for the meeting, Venizelos said: "Our partners know that European unification is founded on the institutional equality of member states and respect for national identity."
German Economy Minister Philipp Roesler had said he supported stricter EU monitoring of Greece, in an interview to be published Monday, after Athens dismissed calls for it to give up control over its budget.
BERLIN (AP) -- Germany is proposing that debt-ridden Greece temporarily cede sovereignty over tax and spending decisions to a powerful eurozone budget commissioner before it can secure further bailouts, an official in Berlin said Saturday.
The idea was quickly rejected by the European Union's executive body and the government in Athens, with the EU Commission in Brussels insisting that "executive tasks must remain the full responsibility of the Greek government, which is accountable before its citizens and its institutions."
But the German official said the initiative is being discussed among the 17-nation currency bloc's finance ministers because Greece has repeatedly failed to fulfill its commitments under its current euro110 billion ($145 billion) lifeline.
BRUSSELS (AP) — Investors participating in a deal to slash Greece's massive debt would face an overall loss on their bond holdings of more than 70 percent, a person involved in with the negotiations said early Tuesday.
European leaders at a summit in Brussels said a final debt deal could be signed off in the coming days, together with a second multibillion-euro bailout package designed to save the country from a potentially disastrous bankruptcy.
Athens and representatives of investors holding Greek government bonds over the weekend came close to a final agreement designed to bring Greece's debt down to a more manageable level. Without a restructuring, those debts would swell to around double the country's economic output by the end of the year.
If the agreement works as planned, it will help Greece remain solvent and help Europe avoid a blow to its already weakened financial system, even though banks and other bond investors will have to accept big losses.
The person involved in the talks said Monday that the more-than 70 percent loss was the result of cutting the bonds' face value in half, reducing the average interest rate to between 3.5 per cent and 4 percent and pushing repayment of the bonds 30 years into the future. A second person briefed on the talks confirmed that the loss on the so-called net present value of the bonds would be around 70 percent.
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