Greek leaders agree on austerity pact for bailout

12:58 AM agree, austerity, bailout, Greek, leaders No Comments

Greek political leaders have reached a deal with EU and IMF lenders on reforms required in return for a new bailout, the office of Prime Minister Lucas Papademos said in a statement on Thursday.

"The consultations between the government and the troika on the issue which remained open for further discussion were successfully completed this morning. The political leaders agreed on the outcome of these talks," Papademos' office said in a statement.

"There is broad agreement on the content of the new programme ahead of today's Eurogroup meeting," the statement said.

Financial markets have been awaiting the deal which would allow Greece to avoid a disorderly default that could disrupt global markets.

Earlier, a spokeswoman for the office of Greek Prime Minister Lucas Papademos said the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected early Thursday during a meeting of the three coalition party leaders.

She spoke on a customary condition of anonymity.

Although all the other cuts demanded by Greece's eurozone partners and the International Monetary Fund were approved, party leaders had balked at new pension cuts.

Reuters and The Associated Press contributed to this report.

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'Huge relief': Banks agree to take loss on Greek debt

5:51 PM agree, Banks, Greek, relief No Comments

BRUSSELS — European leaders clinched a deal Thursday they hope will mark a turning point in their two-year debt crisis, agreeing after a night of tense negotiations to have banks take bigger losses on Greece's debts and to boost the region's weapons against the market turmoil.

After months of dawdling and half-baked solutions, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling.

World stock markets surged higher Thursday on the news. Oil prices rose above $92 per barrel while the euro gained strongly — a signal investors were relieved at the outcome of the contentious negotiations.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."

U.S. President Barack Obama also welcomed the deal, saying Europe's new debt plan lays a "critical foundation" for a comprehensive solution to the continent's financial crisis.

In a statement, Obama said the U.S. looks forward to the rapid implementation of the plan.

Europe's strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece's debts, a shoring up of the continent's banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a €1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

After several missed opportunities, hashing out a plan was a success for the 17-nation eurozone, but the strategy's effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties."

The most difficult piece of the puzzle proved to be Greece, whose debts the leaders vowed to bring down to 120 percent of its GDP by 2020. Under current conditions, they would have ballooned to 180 percent.

To achieve that massive reduction, private creditors like banks will be asked to accept 50 percent losses on the bonds they hold. The Institute of International Finance, which has been negotiating on behalf of the banks, said it was committed to working out an agreement based on that "haircut," but the challenge now will be to ensure that all private bondholders fall in line.

It said the 50 percent cut equals a contribution of €100 billion ($139 billion) to a second rescue for Greece, although the eurozone promised to spend some €30 billion ($42 billion) on guaranteeing the remaining value of the new bonds.

The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January, at which point Greece is likely to become the first euro country ever to be rated at default on its debt.

"We can claim that a new day has come for Greece, and not only for Greece but also for Europe," said Greek Prime Minister George Papandreou, whose country's troubles touched off the crisis two years ago. "Let's hope the worst is over."

Since May 2010, Greece has been surviving on rescue loans worth €110 billion ($150 billion) from the 17 countries that use the euro and the International Monetary Fund since it can't afford to borrow money directly from markets.

In July, those creditors agreed to extend another €109 billion — but that plan was widely panned as insufficient.

Now, in addition to €30 billion in bond guarantees, the eurozone leaders and IMF said they will give Greece €100 billion ($139 billion) in new loans.

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

"While the headlines look good, the devil is in the details," said Damien Boey, equity strategist at Credit Suisse in Sydney.

Protecting the weak
The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility (EFSF) will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

That should make those countries' bonds more attractive investments and thus lower borrowing costs for their governments.

In addition to acting as a direct insurer of bond issues, the EFSF insurance scheme is also supposed to entice big institutional investors to contribute to a special fund that could be used to buy government bonds but also to help states recapitalize weak banks.

Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

Using the insurance promise, the eurozone also hopes to attract big institutional investors from outside the eurozone, such as sovereign wealth funds, to contribute to a separate fund that would back up the EFSF.

Reuters and The Associated Press contributed to this report.

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'Huge relief': Banks agree to take loss on Greek debt

9:55 AM agree, Banks, Greek, relief No Comments

BRUSSELS — European leaders clinched a deal Thursday they hope will mark a turning point in their two-year debt crisis, agreeing after a night of tense negotiations to have banks take bigger losses on Greece's debts and to boost the region's weapons against the market turmoil.

After months of dawdling and half-baked solutions, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling.

World stock markets surged higher Thursday on the news. Oil prices rose above $92 per barrel while the euro gained strongly — a signal investors were relieved at the outcome of the contentious negotiations.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."

U.S. President Barack Obama also welcomed the deal, saying Europe's new debt plan lays a "critical foundation" for a comprehensive solution to the continent's financial crisis.

In a statement, Obama said the U.S. looks forward to the rapid implementation of the plan.

Europe's strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece's debts, a shoring up of the continent's banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a €1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

After several missed opportunities, hashing out a plan was a success for the 17-nation eurozone, but the strategy's effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties."

The most difficult piece of the puzzle proved to be Greece, whose debts the leaders vowed to bring down to 120 percent of its GDP by 2020. Under current conditions, they would have ballooned to 180 percent.

To achieve that massive reduction, private creditors like banks will be asked to accept 50 percent losses on the bonds they hold. The Institute of International Finance, which has been negotiating on behalf of the banks, said it was committed to working out an agreement based on that "haircut," but the challenge now will be to ensure that all private bondholders fall in line.

It said the 50 percent cut equals a contribution of €100 billion ($139 billion) to a second rescue for Greece, although the eurozone promised to spend some €30 billion ($42 billion) on guaranteeing the remaining value of the new bonds.

The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January, at which point Greece is likely to become the first euro country ever to be rated at default on its debt.

"We can claim that a new day has come for Greece, and not only for Greece but also for Europe," said Greek Prime Minister George Papandreou, whose country's troubles touched off the crisis two years ago. "Let's hope the worst is over."

Since May 2010, Greece has been surviving on rescue loans worth €110 billion ($150 billion) from the 17 countries that use the euro and the International Monetary Fund since it can't afford to borrow money directly from markets.

In July, those creditors agreed to extend another €109 billion — but that plan was widely panned as insufficient.

Now, in addition to €30 billion in bond guarantees, the eurozone leaders and IMF said they will give Greece €100 billion ($139 billion) in new loans.

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

"While the headlines look good, the devil is in the details," said Damien Boey, equity strategist at Credit Suisse in Sydney.

Protecting the weak
The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility (EFSF) will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

That should make those countries' bonds more attractive investments and thus lower borrowing costs for their governments.

In addition to acting as a direct insurer of bond issues, the EFSF insurance scheme is also supposed to entice big institutional investors to contribute to a special fund that could be used to buy government bonds but also to help states recapitalize weak banks.

Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

Using the insurance promise, the eurozone also hopes to attract big institutional investors from outside the eurozone, such as sovereign wealth funds, to contribute to a separate fund that would back up the EFSF.

Reuters and The Associated Press contributed to this report.

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Germany, France agree on Europe bank bailout

6:15 PM agree, bailout, Europe, France, Germany No Comments

BERLIN — The leaders of Germany and France, the eurozone's two biggest economies, said Sunday they have reached an agreement about how to strengthen Europe's shaky banking sector amid the region's debt crisis.

"We are determined to do the necessary to ensure the recapitalization of Europe's banks," German Chancellor Angela Merkel following talks with French President Nicolas Sarkozy in Berlin.

A "comprehensive response" to the eurozone's debt crisis will be finalized by month's end, including a detailed plan on recapitalizing the banks, Sarkozy said at Berlin's chancellery.

"The economy needs secure financing to ensure growth. There is no prospering economy without stable banks," he said. "That is what is at stake."

However, both leaders declined to name a price tag for the new measures or elaborate further, saying the proposal must first be discussed with other European leaders.

Analysts have urged the eurozone to identify all the banks in the region that need to replenish their capital reserves, then decide whether to compel them to raise that money on the open markets and to provide government financing to the ones that can't.

Many experts say the capital cushions of many European banks must be strengthened in order to withstand a possible government bond default by Greece. Some analysts fear that a Greek default could cause a severe credit squeeze that would even threaten banks not exposed directly to Greece's debt because banks could be afraid to lend to each other.

The credit freeze following the collapse of U.S. investment bank Lehman Brothers in 2008 choked off lending to the wider economy and caused a deep recession.

Merkel did not provide details Sunday about how the recapitalization would work, saying only that all banks across the eurozone would be measured by the same criteria in coordination with, among others, the European Banking Authority and the International Monetary Fund.

Any solution must be "sustainable," Merkel added.

Sarkozy said the French-German accord on the proposal "is total."

Germany and France will now submit their proposal to shore up Europe's shaky banking sector to other European Union governments ahead of an Oct. 17-18 summit of the bloc's 27 leaders in Brussels, they said.

Both leaders expressed confidence that a comprehensive European response to the crisis will be finalized before a summit of the G-20 most developed nations in France Nov. 3-4.

"The global economy needs this summit to become a success, and the European Union will do its part" to ensure a positive outcome, Merkel said.

The IMF has said banks across the continent might need up to €200 billion ($267 billion) in new capital. The EU disputes the IMF's estimate, but has warned that lending between banks and from banks to businesses is threatening to freeze up.

Earlier this week, Merkel said that banks must first seek to raise new capital on the market before turning to their government, insisting that the eurozone's newly strengthened €440 billion ($590 billion) bailout fund would then only serve as a backstop if a member state can't cope with shoring up its banks' capital.

France, however, was reported to favor turning to the fund's resources right away instead of relying on a national facility to re-capitalize its banks — who are among the biggest holders of Greek bonds.

But Sarkozy sought on Sunday to dispel the notion of different approaches regarding the European Financial Stability Facility, saying "there are no disagreements."

German Finance Minister Wolfgang Schaeuble and his French counterpart, Francois Baroin, also took part in the two leaders' discussions.

Merkel and Sarkozy were set to have a working dinner following the news conference they gave at the chancellery.

Germany and France, which together represent about half of the 17-nation currency zone's economic output, regularly hold talks before EU summits to chart out joint positions.

The implosion of Belgian lender Dexia following its sizable exposure to Greek and other eurozone sovereign debt, meanwhile, added a sense of urgency to the talks.

France, Belgium and Luxembourg announced Sunday they had approved a plan for the future of the embattled bank, but they offered no details. France and Belgium became part owners of the bank during a €6 billion ($7.8 billion) 2008 bailout.

While an all-out Greek default appears unlikely, bondholders might still face severe losses, with some analysts maintaining that Greece's debt must be cut by about 50 percent or more to attain a sustainable level.

Private bondholders agreed in July to take about a 20 percent cut on their holdings of Greek bonds as their participation in a second international €109 billion bailout for the country.

But Finance Minister Schaeuble on Sunday joined Merkel and other eurozone officials in hinting that the agreement might have to be renegotiated.

"It is possible that we have so far assumed an insufficient percentage of debt reduction," he told German newspaper Frankfurter Allgemeine Sonntagszeitung.

Such a move will be discussed after the so-called troika of Greece's international creditors — European Central Bank, European Commission and IMF — submits its next progress report later this month, Schaeuble was quoted as saying.

Greece is currently struggling to meet budget and reform targets, but it needs an over all positive progress assessment by the troika to qualify for the next €8 billion ($11 billion) installment of its €110 billion package of international bailout loans to avoid bankruptcy.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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France, Belgium, Luxembourg agree on Dexia plan

8:04 PM agree, Belgium, Dexia, France, Luxembourg No Comments

BRUSSELS — The governments of France, Belgium and Luxembourg said Sunday they have approved a plan for the future of embattled bank Dexia after shares tanked last week amid fears it could go bankrupt.

In a three-sentence statement issued by the Belgian prime minister's office, they said they support a proposal by the bank's management that will be submitted to its board of directors, but offered few details. The board was holding a crisis meeting late Sunday in Brussels amid reports that the bank might be split up.

A spokesman said a bank officials would hold a news conference Sunday evening or Monday morning.

Late Sunday, the Belgian newspaper Le Soir, citing no sources, reported on its website that the Belgian government had agreed to buy Dexia Bank Belgium from Dexia SA, the French-Belgian banking group, for €4 billion ($5.37 billion). The Belgian government would be the sole shareholder, the newspaper reported.

Asked about the report, Dominique Dehaene, a spokesman for the Belgian prime minister, declined comment. Dehaene confirmed that government officials planned to hold a meeting late Sunday after the conclusion of the meeting of the bank's board of directors.

Finding a solution is particularly urgent for Belgium because on Friday Moody's Investors Service placed the country's Aa1 rating on review for possible downgrade, due in part to the expected expense of guaranteeing that Dexia's depositors will lose no money.

The French government, too, is under acute pressure to save Dexia as the bank is one of the country's largest lenders to towns and cities.

The government statement, while giving no details, said the "suggested solution" had been "the result of intense consultations with all partners involved" — which would include the three countries. France and Belgium became part owners of the bank during a €6 billion ($7.8 billion) 2008 bailout. They have promised to ensure that no Dexia depositors lose money. Luxembourg holds a smaller stake.

The terse government statement followed a meeting in Brussels attended by Belgium's caretaker prime minister, Yves Leterme, French Prime Minister Francois Fillon, and Luxembourg Finance Minister Luc Frieden.

Asked whether a resolution would be achieved Sunday, Leterme replied, "It will depend on the board," the Belgian newspaper La Capitale reported on its website. Leterme's spokesman could not be reached Sunday evening.

After Dexia's shares plunged last week, the French and Belgian governments stepped in and guaranteed its financing and deposits. The bank said in a statement Friday that trading in its shares would remain frozen until it could "communicate more precisely on the various choices and options concerning the future of the group."

The bank has significant exposure to Greek debt, and there are fears Greece may default in some fashion. French and Belgian governments have said in recent days that they would step in and guarantee the bank's financing and deposits.

There was speculation last week that one way forward would be to break up the bank and isolate Dexia's toxic assets — totaling €100 billion ($132 billion) — in a "bad bank" while its healthy parts would be sold individually.

Speaking on Belgium's VRT network, Leterme did not want to use the label "bad bank" to describe where the toxic assets may be parked, and voiced his hope that in the long-term they could earn "good money."

If the bank were to break up, it would be the first such casualty of the euro crisis, which has bedeviled European Union officials for nearly two years.

However, there was no confirmation Sunday from either government or bank officials that breaking up the bank was part of the proposed solution.

_____

Don Melvin can be reached at http://twitter.com/Don_Melvin.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Deutsche Börse, NYSE agree to merger

4:20 PM agree, Deutsche, merger No Comments

NEW YORK – Germany's Deutsche Borse and NYSE Euronext said Tuesday, you have a deal to combine two of the world's largest stock exchanges in a global trading power.

The new company are not named and included in Amsterdam led by NYSE Chief Executive Duncan Niederauer with Deutsche Borse CEO Reto Francioni taking up the post of the Chairman, said the company.

Deutsche Borse shareholders are set to 60 percent have combined company with NYSE Euronext shareholders, taking a 40 percent share. The combined group have 2010 net income of $5.4 billion, always the world's largest Exchange group by revenue, who said two companies and yield combined synergies of 405.2 million $ (300 million).

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Any NYSE Euronext share will be transformed into 0 of share in the new holding. Deutsche Borse shares will be converted into a share of the new company. NYSE Euronext business would value to about 10 billion dollars under these conditions.

Last week, the two companies presented the first details of a merger plan that would create world's largest stock exchange, only a few hours after the London Stock Exchange said it would buy Canada TMX, sparking a merger frenzy in the sector.

Attention to the last round of tenders near regulators numbers. Users have raised red flags about the proposed tie ups.

"Euronext and Deutsche Borse are still screwing us fees for clearing, the closing auctions and small and medium-sized trading - the areas where you have virtual monopolies," said the head of markets on a large European Bank named rejected. "A merger is because together you are placed more powerful and better protect these monopolies."

Political and regulatory hurdles to the German Stock Exchange-NYSE Euronext tie-up threaten.

"The biggest question mark in general obviously the European political and regulatory landscape, which is coming out of this", said one source.

The boards of two Exchange owner have signed off on the deal, but it must still be approved by the shareholders and regulators.

The Frankfurt and New York-based company were Center of stage in the fusion frenzy that broke last week and heated on Monday as Brazil's BM & FBovespa said it was looking on your own perspectives and speculation, the CME Group in the fray intensified could jump.

Fox Business Network reported that CME Group, currently the world could top group derivatives exchange a hostile bid for NYSE Euronext, citing bankers.

A spokesman for the Chicago-based Exchange turned down an opinion. CME officials investors have guiding been from expectations, it would do a merger deal.

BM-& - FBovespa, the world's fourth largest financial exchange operator, closely tie-up locates, said Chief Executive E. of Pinto Reuters. Pinto said China and India markets were where it could expand.

Owners of traditional exchanges have been since save combines several years cost as competitors mounts from new computerized exchanges with names like FLEDERMAUSE and Chi-X.

The Group operator of the New York Stock Exchange, NYSE Euronext bought 10.2 billion US $ in 2007 hit from a rival bid of Deutsche Borse. The company covers stock and derivative markets in Amsterdam, Brussels, Lisbon and Paris and NYSE liffe derivatives market.

Deutsche Borse, whose Vorganger was founded in 1585 operates the Exchange in Europe's largest economy. It is also Europe's largest derivative Exchange, Eurex.

The largest Exchange owner in the United States is currently $20 billion CME Group. CME is the Chicago Mercantile Exchange, where wheat, corn and pork belly futures, and a number of other exchanges are traded.

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