Rolling coverage of the Greek debt crisis, as markets welcome signs that Athens will compromise at Wednesday night’s eurogroup meetingLatest: Bonds and shares rally in AthensReminder: Compromise plan being devisedGeorge Osborne: Danger of ‘very bad outcome’ from Greek crisis is risingGreek government faces vote of confidence tonight 11.56am GMT A breakthrough between Greece and the rest of the eurozone is more likely to come at next Monday’s eurogroup meeting, rather than tomorrow night’s emergency gathering.EU does not expect too much regarding finalising a deal with #Greece this week (@RANsquawk) - likely to go down to wire at 16 Feb #Eurogroup 11.36am GMT Gary Jenkins, City analyst at LNG Capital, reckons Greece’s creditors could support some parts of its compromise plan, but aren’t likely to agree to a debt swap.Here’s his view of the key points . It’s quite long, but worth reading ahead of tomorrow’s Eurogroup meeting.Obviously the devil would be in the detail and it is impossible to comment without that. However it is possible that some new reforms could be agreed upon and some old ones amended, so it is at least a negotiating point. To some degree this is linked to (3) below, but considering the economic hardship endured by Greece it is difficult to believe that there would be no movement on this point. It may depend upon exactly what the money would be utilised for of course, but a reduction of this kind is unlikely to be the straw that breaks the Eurozone’s back.This is likely to be some kind of swap where the debt (or a portion of it) becomes linked to economic growth. Here we have a potential sticking point: Whilst I think that the Greek debt burden is too high the fact is that the Eurozone may regard it as ‘sustainable’ because of the duration of the debt and the interest rate. Thus they may think that it is ‘sustainable’ even if they do not think it is ‘repayable.’Therefore they may not wish to consider and change to the debt load or any material changes to the terms at this stage. They may well agree to a further extension and / or a lowering of the interest rate (either now or at a later date if Greece sticks to the new deal) but they are unlikely to consider a write down at this stage. The idea of linking the debt to GDP may be favoured by many economists but the EZ may believe that the kind of monitoring that would be required would be beyond their relationship with the new government at this stage. This is linked to the other points and again the devil is in the detail. If the Greek government is allowed to run a lower primary surplus and use that money for ‘humanitarian’ purposes it is difficult to see why the EZ would turn them aside. I’m not sure about the ‘profits’ as to whether they are realised or mark to market. The T – bills may be an acceptable compromise but I would imagine that the ELA would continue to be very tightly monitored.The EZ may not want the Greek government to draw down additional funds unless they publically state that they remain in a programme. This is probably more about political face saving for both parties and it would be surprising if some kind of wording could not be drawn up that was acceptable to both parties. However it could all fall down on the point of being in a programme or not. 11.34am GMT Greek bond yields are still falling today, on hopes of a compromise deal being agreed.But as this chart shows, they’re still much higher than before the current crisis began.#Greece - New Deal? Athens prepares a compromise before #Eurogroup. Greek 3yr yields drop. http://t.co/xTZVwlJSKA pic.twitter.com/9ss0ZXTng6 11.17am GMT Newsflash from Brussels - the European Commission isn’t confident of a big breakthrough this week:EU says 'expectations are low' for final Greek pact this week. 10.58am GMT Ed Balls, Labour’s shadow chancellor, has warned the British Chambers of Commerce annual conference in London that eurozone leaders have serious issues to tackle (but he didn’t speak specifically about Greece).Ed Balls says "eurozone is in a huge chronic state at the moment" #bccconf 10.51am GMT A Greek minister has declared that the new government will not be blackmailed by Germany into abandoning its anti-austerity programme.lafazanis says we will not be blackmailed by merkel and schauble and forced into retreat. "our program is not a flag of convenience".lafazanis: if some try to send ultimatums they should know they will have chosen wrong country, wrong people, wrong govt.industrial production being crushed between financing, multinationals and high energy costs, says lafazanisbottom line: no energy privatizations, new strategy with diversified partners and agreements.Day before Eurogroup, Greek gov't announces it will cancel privatisation of electric power company PPC and gas supplier DEPA. #Greece 10.27am GMT Peter Spiegel of the Financial Times has written a (typically) excellent Q&A on the Greek crisis.In it, he explains that European officials are worried that Greece could run out of money in March, rather than cling on until the summer. With no way to raise cash on the capital markets, and no bailout financing in place, Athens could literally go bust. A developed country defaulting on an IMF payment would be unprecedented.This would seem an obvious and simple solution, but no such thing exists in the eurozone arsenal. The European Stability Mechanism, the eurozone’s new €500bn bailout fund, can fund full-scale bailouts, bank recapitalisation programmes and even purchase sovereign bonds on the open market. But it has no tool to offer a short-term loan.Besides, given demands from Berlin and elsewhere for Athens to stick to its bailout commitments, it is unlikely a bridge loan — even if it existed — would come without tough conditions akin to the current bailout.Very useful (and free :-)) FT Q&A clearly explains the next steps & options re #Greece bailout - by @SpiegelPeter http://t.co/A732mpdupZ 10.18am GMT More commentators are waking up to the fact that Greece is likely to compromise at tomorrow night’s eurogroup [as readers of this blog learned yesterday afternoon].But, as the Telegraph’s Ambrose Evans-Pritchard points out, we don’t know if Greece’s lenders will play ball.Greek deal emerging? 30% Troika reforms scrubbed. Primary surplus 2015 halved to 1.5%. Syriza bites into new loan. http://t.co/aUlGwqiBbvVaroufakis letter to Juncker is big shift, but getting creditors to agree is not easy. Still wants debt swap. May avert immediate crunch 9.52am GMT Greece’s defence minister has also waded into the bailout crisis, suggesting that Athens could tap “another source” for funding.“What we want is a deal.”“But if there is no deal and if we see that Germany remains unbending and wants to blow Europe apart, then we have the obligation to go to Plan B. Plan B is to get funding from another source.”But remember: def min not Syriza MT @ekathimerini: Greece could get funding 'from another source,' says defense min http://t.co/3kWNglzPEP 9.31am GMT Back at the G20 meeting in Istanbul, Canada’s finance minister has argued that Greece isn’t the same threat to world stability as in 2012.Reuters has the details:Regulatory and financial reforms have helped diminish the risk Greece may pose to the euro zone, Canada’s finance minister said on Tuesday, amidst growing concern about Athens’ determination to ease austerity measures.Speaking to reporters on the sidelines of the G20 meeting of finance ministers and central bankers, Joe Oliver also said the mood at the talks was ‘determined’, but not optimistic. 9.28am GMT One of the new Greek government’s loudest media critics isn’t too impressed by the compromise plan being drawn up in Athens:How do you measure 30% of program which Varoufakis wants to scrap? By action points? Impact? Legislative lines? Lots of scope for fudge.Possible Greek compromise? Athens asks for new "contract" that is exactly same as old "bailout" minus 30% of reforms measured by headlines. 9.09am GMT #Greece Athens Stock Exchange starts +2.59% after signs of compromise with eurogroup #ASE 9.00am GMT So, what is this compromise plan that is calming the Greek crisis this morning?As we wrote in yesterday’s liveblog, it revolves around Wednesday night’s Eurogroup meeting of eurozone finance chiefs.Greece compromise plan include possibility of tapping part of bailout loan of €7bn, that it said would reject: source http://t.co/xMIHVcBJ9x 8.56am GMT 8.45am GMT Another sign of rising confidence -- Greece’s three-year and five-year bonds are also recovering this morning along with the benchmark 10-year bond.That is pushing down their yields too: 8.41am GMT Greece’s stock market is rising in early trading, clawing back some of yesterday’s big selloff.The main Athens index has gained more than 3%, with Greece’s banks bouncing back [bank share prices have either jumped or tumbled by 10% on most days since Syriza won the general election last month]RT @ManosGiakoumis: #Greece stock market opens +3.4%, banks +8.5%. #economy #banking #makets 8.35am GMT Greek bonds are rising, a little, in early trading, suggesting that investors are a little less worried about the crisis.This has pushed down the yield (or interest rate) on Greece 10-year bond to 10.9%, down from 11.3% on Monday night. That’s still a worryingly high yield; anything over 7% means a country is basically locked out of the markets. 8.26am GMT George Osborne’s warning may not reassure the City, where traders are already fretting about the Greek crisis.After a period of relative calm following the ascension of Syriza to power, the type of rhetoric that investors were initially fearing is beginning to flow through. 8.20am GMT John Longworth, the head of the British Chambers of Commerce, sounds less worried than George Osborne about the Greek crisis. He reckons British business wouldn’t actually be severely hurt if Greece left the eurozone. 8.07am GMT I suspect George Osborne’s comments may not go down too well with the rest of Europe. Our Europe editor, Ian Traynor, reports that top diplomants in Brussels reacted with bemusement to David Cameron’s emergency Grexit meeting on Monday. Is the UK making too much fuss?#grexit in brussels, senior dips, officials bemused by cameron's alleged contingency planning on greece, seen as diversionary headline-grab 7.43am GMT Britain’s chancellor of the exchequer has warned that the risks of a “very bad outcome” from the ongoing Greek debt crisis has risen.Speaking in Istanbul, George Osborne told Bloomberg TV that there is a growing danger that the deadlock over Greece’s bailout programme spirals out of control.“It’s clear that the risks to the world economy, the risk to the British economy of this standoff between the euro zone and Greece, is growing each day.The risks of a miscalculation or a misstep leading to a very bad outcome are growing as well.” 7.43am GMT Good morning, and welcome to our rolling coverage of the Greek debt crisis, and other events across the world economy, the financial markets and business.A sense of optimism in Athens as OECD's Gurría visits town to discuss reform pkge (& debt restructuring?). Parliament to vote on govt 2nite. Continue reading...
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