15.00: Contributions to the second Greek bailout, worth €115bn, will come from the EFSF, the IMF, private sector bondholders and Greek privatisation revenues, Reuters reported. EU leaders said their aims were to make Greece’s debt more sustainable and prevent contagion from poisoning access to the bond market for other euro zone states.
14.45: A draft document circulating at the summit says the ‘Marshall Plan’ for investment in Greece sets at 3.5% interest rates for new loans. Under the deal, the maturity of the Greek debt has been extended to 15 years from 7.5 years. Private sector participation is ikely, the Dow Jones reports.
14.40: ECB is willing to give way on a default. Euro jumps to 1.4240 from 1.4190 against the dollar.
14.25: Europe’s finance ministers have reached a draft summit agreement inspired by the Marshall Plan created following the Second World War. It will focus on investment and growth stimulation, according to the Guardian. Existing loans in the EFSF will be extended from seven and a half years to 15.
14.20: Professor of Economics based in Athens Yanis Varoufakis tweets that there is little difference between pursuing a bank levy or forced swap for Greek bonds. “Both options are barking up the wrong tree,” he said.
14.10: The Finns want Greece to put up collateral for any further loans, according to the Daily Telegraph. A Finnish diplomat says this is a ‘red line’, and that Greece has €300bn in state property that can be collateral.
13.55: Ireland’s political leader Enda Kenny is confident of getting an interest rate cut, on the tails of a Greek rejig, according to Channel 4 economics editor Faisal Islam who said he has seen comments from Kenny at today’s meeting in Brussels.
13.36: It seems the EU leaders will allow selective default in a Greek bond swap and buyback. Market commentators are talking about an IMF report on the 2001 Argentina crisis: “An important lesson (from that) is that market-based and voluntary financial engineering operations, such as debt swaps transacted at current market yields, do not work during a crisis. Voluntary debt swaps (and debt buybacks) done during a crisis can be likened to the case of an individual who, unable to service mortgage undertaken when interest rates were low, decides to refinance it at a much higher interest rate in exchange for temporary relief…”
13.26: Angelos Damaskos, chief executive of Sector Investment Managers and fund adviser for the Junior Oils Trust has liquidated one third of his fund’s bond portfolio and is investing the proceeds and cash holdings into equities. He does not expect a eurozone crisis to impact negatively on the fund’s portfolio: “Independent of market conditions and the European financial crisis, the companies we have invested in should prosper in an environment of growing demand for oil,” he said.
13.11: Stuart Thomson, Ignis Asset Management: “The desperation of politicians caught between the ECB and single currency constitutions and market chaos is evident. And the longer politicians prevaricate, the greater the widening of peripheral spreads in the near-term.”
12.58: Clive Lennox, head of foreign exchange trading at Clear Currency:
“All indications are that an agreement for a package will be hammered out at today’s EU Summit. It is likely that last minute positioning before and during the Summit will drive the currency markets as investors speculate on the outcome.”
12.53:Francisco Garzarelli of Goldman Sachs said it is “decision time or bust’, but noted the high expectations of a favourable outcome from the summit. If all goes according to plan, he believes almost all the widening in intra-EMU spreads seen since Moody’s downgrade of Portugal could be corrected. He doubts there will be any further positive developments before September, as any decision has to be put before national parliaments. Also, concerns over the pace of global growth remain are affecting weaker borrowers. Investors may want to reduce risk in a recovering market.
12.51: Online stockbroker TD Waterhouse reports financial stocks were among the most traded by its customers in the week ending 19 July as the European Banking Authority announced the results of its stress tests across Europe.
12.44: Hans Peterson, SEB’s head of investment strategy, said his house view is the euro will survive. “It is a solidarity pact between stronger and weaker countries. There is no alternative. Also it is an important asset in which countries in surplus can invest.”
12.40: World First foreign exchange chief economist Jeremy Cook: “You could argue that we have already seen the effect on the core that the IMF warned of, with the yields on Italian debt rising close to the 6% level. For a problem that was said to be confined to the periphery it is having a dramatic effect elsewhere.”
12.30: Russell Investments does not expect the summit to produce “a neat, holistic, immediate resolution” but it wants to see ” a clear display of unity amongst the European national leaders, and solid commitment by the ECB to play a constructive role.”
12.20 Russell Investments head of capital markets research for EMEA John Velis said “a default, withdrawal, or ejection of one of the peripheral, highly indebted countries of the eurozone would be catastrophic for the European and ultimately the global economy and financial system.”
12.15 EU’s de facto leaders, France and Germany have agreed a possible way forward through the Greek debt crisis. Reuters reports willingnesss to contemplate temporary debt default.
