Asian markets rise on Greece deal

HONG KONG: Asian markets rose in early trade Tuesday after the eurozone and the IMF agreed to unlock 43.7 billion euros ($56 billion) in loans to Greece and grant significant debt relief for decades to come.

Tokyo shares rose 0.38 per cent by the break, Hong Kong was up 0.25 per cent and Sydney gained 0.68 per cent.

Seoul opened flat but Shanghai was down 0.76 per cent on concerns over the strength of recovery in the domestic economy.

The Eurogroup of currency partners penned the Greek deal at its third late-night meeting in two weeks, agreeing to release, in December, the funds after months in which Greece was starved of bailout financing.

Greece, struggling to stay afloat despite a series of unpopular austerity measures, has been waiting impatiently for an injection of international loans for several weeks to avoid defaulting on its upcoming debt repayments.

Greece's public creditors agreed to take measures to bring down the country's debt-to-GDP ratio from an estimated 144 per cent to 124 per cent within eight years, in exchange for the bailout funds.

Finance ministers, the IMF and the European Central Bank said the money would be paid in four instalments from December 13 through until the end of March.

Greek Prime Minister Antonis Samaras said the agreement represented a fresh start for his beleaguered country.

"Everything has gone well," Samaras told local media in Athens. "All Greeks have fought (for this decision) and tomorrow is a new day for every Greek person."

ECB President Mario Draghi said: "The decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece."

US markets were feeble in the first session after a slow Thanksgiving holiday week, with the jury still out over how strong the crucial Black Friday holiday sales were for retailers.

The Dow Jones Industrial Average finished down 42.31 points (0.33 per cent) at 12,967.37.

The broad-market S&P 500 lost 2.86 (0.20 per cent) at 1,406.29, while the Nasdaq Composite rose 9.93 (0.33 per cent) to 2,976.78.

On currency markets the euro was stronger in Asian trade as investors breathed a sigh of relief over the deal for Greece.

The 17-nation currency bought $1.2980 and 106.46 yen in Tokyo morning trade after briefly topping $1.30 for the first time in about a month.

That was up from $1.2971 and 106.38 yen in New York trade late Monday, although the euro eased slightly after the Greece announcement.

The dollar was flat at 82 yen.

On oil markets, New York's main contract, West Texas Intermediate (WTI) for January delivery, bounced 30 cents to $88.04 a barrel and Brent North Sea crude, also for January, jumped 29 cents to $111.21.

Gold was at $1,749.50 at 0310 GMT compared with $1,734.47 late Monday.

Greece wins significant debt relief

BRUSSELS - Greece won big breathing space Tuesday with long-frozen eurozone loans to restart from December and a first clear admission that a chunk of the country's debt burden will need to be written off down the line.

After 13 hours of talks in Brussels, the eurozone and the International Monetary Fund agreed to unlock 43.7 billion euros (US$56 billion) in loans and grant significant debt relief going forward for decades to come.

Greece must still meet a series of agreed conditions but "the decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece," said European Central Bank President Mario Draghi, who left the talks before a final.

Starved of bailout financing since the summer, Greek Prime Minister Antonis Samaras hailed the deal in Athens, while German Finance Minister Wolfgang Schaeuble said the package would be presented to German lawmakers by the end of the week.

"Everything has gone well," Samaras told reporters in Athens.

"All Greeks have fought (for this decision) and tomorrow is a new day for every Greek person," he added.

Finance ministers, the IMF and the ECB said the money would be paid in four instalments from December 13 through until the end of March, conditional on Greece funneling income back to creditors at source and on the implementation by Athens of tax reforms settled with creditors.

The results of the "laborious" negotiations according to IMF head Christine Lagarde are intended to see Greece's debt-to-GDP ratio fall from an estimated 144 percent to 124 percent come 2020, and "substantially below 110 per cent" of gross domestic product by 2022.

"The IMF wanted to make sure the euro partners would take the necessary actions to bring Greece's debt on a sustainable path," said Lagarde. "I can say today that it has been achieved."

There will be a mixture of techniques used to bring down Greece's debt burden.

These will begin with a buyback by Greece of old debt that has fallen in value on commercial money markets as well as national central banks across the eurozone foregoing profits on holdings of Greek debt whose worth has slumped.

Interest rates due to eurozone creditors will also be trimmed or deferred -- Ireland and Portugal can now be expected to demand parity -- while maturity dates will be pushed back by years.

The original bailout rewrite agreed for Greece in March was meant to see Greece's debt fall to 120 percent of gross domestic product by 2020.

"Greece has delivered, now it's delivery time for the Eurogroup and the IMF," said Rehn.

The IMF is pushing for a so-called "haircut" or write-down of debt by eurozone partner governments in the way banks wrote off most of the loans due to them earlier this year, but Germany has come out against this ahead of a general election next year.

Other Triple A-rated states, though, have said they would "not exclude" the possibility of a write-down of debt from 2015 onwards.

France has long been a firm backer of all efforts to keep Greece in the eurozone club, and having lost its Triple-A status, Finance Minister Pierre Moscovici said: "Let's assume our responsibilities."

Greece has been waiting since June for a loan instalment of 31.2 billion euros (US$40 billion), part of a 130-billion-euro rescue granted earlier this year.

In exchange, Athens has pledged to implement a new series of radical austerity measures to cut its annual overspending.
Merkel hostile to "haircut"

Samaras' government pushed a fresh batch of deeply unpopular cuts through parliament earlier this month.

Greece's public creditors have decided to give Greece an extra two years, until 2016, to balance the books.

Greece's private creditors have written off more than 100 billion euros in debt, and the IMF has urged the ECB to accept this solution.

But both the central bank and Germany have so far held out against making any similar move, saying it would violate EU mandates against bankrolling individual countries.

German Chancellor Angela Merkel has said she is "against this debt write-off and I want to find another solution."

IMF says Greek loan talks stuck as bankruptcy looms

ATHENS: Greece's negotiations with international lenders for desperately needed rescue funds some two weeks before bankruptcy looms are stuck, the IMF said Thursday, sending Greek stocks plunging.

The International Monetary Fund said the talks were stalled over the conditions for financing Greece as it seeks a two-year extension to meet fiscal goals.

While Athens has made "good progress" on fiscal and structural reforms, IMF spokesman Gerry Rice said in Washington, "an understanding must also be reached between Greece and its creditors on financing terms consistent with debt sustainability."

That news triggered a five percent drop in Athens' main ATHEX stock index, which tumbled below the 800 point level to close at 761.24 points.

Shares in banks, which are awaiting some of the rescue money to shore up their capital, were the worst hit, with the banking stocks sub-index down by 11.7 percent.

Greece, the IMF, the European Union and the European Central Bank, known as the troika, have been locked in discussions for weeks on revising terms for the country's bailout after it fell short of targets which needed to be met for the release of the next installment of funds from the three lenders.

Athens has asked for the fiscal targets to be pushed back another two years, to give it more room to rekindle economic growth after a crushing austerity programme sent it into a deeper recession than the lenders had expected.

Greek Prime Minister Antonis Samaras has said the coffers in Athens will run dry on November 16 -- when a three-month treasury bill worth five billion euros must be repaid -- unless his country receives the next 31.2 billion euros ($40.4 billion) in rescue funding.

Samaras had announced on Tuesday that his government had agreed with the mission of troika auditors in Greece on the terms of a new 13.5 billion euro austerity package needed to unlock the next instalment of rescue loans.

Accordingly, the finance ministry on Wednesday introduced a budget and a three-year economic programme pledging the required level of cuts in 2013-14.

But on the same day the European Commission warned that a debt deal with Athens was still pending. Eurozone finance ministers are due to make a final decision on the payout by November 12.

Finance Minister Wolfgang Schaeuble of Germany, Europe's paymaster, noted that considerable progress had been made in the talks with Greece "but there is still a lot of work to do."

The 2013 Greek budget gives a grim picture of the outlook for the country.

It predicted that gross domestic product in Greece -- already in its fifth year of recession -- would shrink by 4.5 percent compared with a forecast of 3.8 percent a month ago, although below the 6.6 percent decline expected for this year.

The 2013 public deficit forecast was raised to 5.2 percent from the previous prediction of 4.2 percent.

The government is planning 9.4 billion euros ($12.2 billion) in cuts which will affect mainly state wages, pensions and benefits that have already been drastically reduced over the past two years.

But it will still need to borrow over 68 billion euros next year, the draft budget said.

"If the deal does not pass... the country will be led to chaos," Samaras warned on Tuesday.

The IMF on Thursday also pushed for wealthy Greeks to pay their fair share of the tax burden amid uproar in Greece over a list of alleged tax evaders.

Greek investigative journalist, Costas Vaxevanis, was arrested Sunday after publishing the so-called Lagarde list, named after IMF chief Christine Lagarde, who in her previous position as French finance minister in 2010 passed a roster of some 2,000 Greeks holding Swiss bank accounts to the Greek government.

The crushing austerity measures in Greece, with no sign of relenting, have led unions to threaten more social unrest, announcing a 48-hour general strike starting November 6 to coincide with debates next week on the budget and other reform measures.

Moody's declares Greece in default of debt

WASHINGTON - Moody's declared Greece in default on its debt Friday after Athens carved out a deal with private creditors for a bond exchange that will write off 107 billion euros (S$175.9 billion) of its debt.

Moody's pointed out that even as 85.8 per cent of the holders of Greek-law bonds had signed onto the deal, the exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate.

Overall the cost to bondholders, based on the net present value of the debt, will be at least 70 per cent of the investment, Moody's said.

"According to Moody's definitions, this exchange represents a 'distressed exchange,' and therefore a debt default," the US-based rating firm said.

For one, "The exchange amounts to a diminished financial obligation relative to the original obligation."

Secondly, it "has the effect of allowing Greece to avoid payment default in the future."

Ahead of the debt deal, Moody's had already slashed Greece's credit grade to its lowest level, "C," and so there was no impact on the rating.

Moody's said it will revisit the rating to see how the debt writedown, and the second eurozone bailout package, would affect its finances.

However, it added, at the beginning of March "Moody's had said that the risk of a default, even after the debt exchange has been completed, remains high."

EU warns of recession in 2012

BRUSSELS: Europe warned on Thursday that its debt crisis was dragging the region towards a new recession, deepening the sense of foreboding as Italy and Greece struggled to put together new governments.

Amid a call by the head of the International Monetary Fund for an end to the political wrangling, it was still unclear who would emerge as the new leaders of Greece and Italy after both countries' premiers threw in the towel.

After doubts grew over Italy's ability to keep servicing its debts, the European Union's new economy tsar said the bloc faced tipping back into recession in 2012 due to a "vicious circle" of government debt, vulnerable banks and collapsed spending.

"Growth has stalled in Europe, and there is a risk of a new recession," Olli Rehn said as the EU released detailed forecasts for the eurozone and broader econonomy for the next two years, with GDP "now projected to stagnate until well into 2012."

Growth across the eurozone in 2012 would collapse to 0.5 percent, said the forecast, a steep drop from its previous prediction of 1.8 percent. The forecast for this year was also revised downwards from 1.6 to 1.5 percent.

The economy in Italy, the eurozone's third largest economy, would virtually stagnate in 2012 with growth of just 0.1 percent, according to the forecast.

Italy's growing crisis has already prompted Prime Minister Silvio Berlusconi to announce his resignation. He will stand down after parliamentary approval this weekend of a package of economic reforms aimed at calming investor fears, which have pushed Italy's borrowing rates to alarming levels of seven percent.

The handover of power has led to fevered backroom negotiations, with former EU commissioner Mario Monti seen as the frontrunner to succeed Berlusconi.

Monti received the backing on Thursday of Berlusconi, with the outgoing premier saying that he would work "in the interests of the country".

The 68-year-old Monti earned a fearless reputation as the European Union's competition commissioner taking on US corporate giants Microsoft and General Electric and is seen as a possible head of a national unity government.

Monti's appointment was not a done deal however after several leading members of Berlusconi's centre-right coalition insisted on early elections.

"Italy is facing a difficult time and particularly arduous choices to overcome the crisis," said President Giorgio Napolitano, who will be forced to call early elections if there is no consensus on a new government.

"Europe is urgently awaiting important signals of a taking on of responsibility by one of its founders. We will be up to the task."

On Wednesday, Italy's 10-year bond yields flew over 7.0-percent to heights that could make it impossible for Rome to keep financing its 1.9-trillion euro ($2.6 trillion) debt.

In a key test after Berlusconi's resignation announcement, Italy paid record rates of over six percent at an auction of treasury bills on Thursday.

Greece is also been in political turmoil since Prime Minister George Papandreou announced on Sunday he was standing down, triggering days of bickering between political leaders over the succession.

There was hope however that a new transitional government could be announced on Thursday whose first task will be to ratify a crucial EU bailout deal.

A meeting between President Carolos Papoulias and top political leaders opened at 0800 GMT with reports indicating that former European Central Bank vice-president Lucas Papademos would be given the reins of government in Greece's worst post-war crisis.

The Athens stock exchange was up 2.19 percent in morning trade in expectation of a deal on the fourth day of secrecy-veiled negotiations between Papandreou and the head of the opposition, conservative leader Antonis Samaras.

Europe's main markets plunged in early trading but staged a slight rally later in the morning. Frankfurt rebounded 1.04 percent and Paris added 0.98 percent, despite rising pressures in the French bond market.

Christine Lagarde, the head of the IMF, said both Greece and Italy urgently needed to sort out their leadership difficulties.

"Political clarity is conducive to more stability ... it is much needed in Greece, it is much needed in Italy," the IMF chief told journalists in Beijing.

Confusion over the future leadership of both countries was "conducive to volatility," added Lagarde, who is on a two-day visit to China.

The turmoil in parts of the eurozone has prompted questions about the single currency's whole future, including in the continent's economic powerhouse Germany.

According to a report in the German business daily Handelsblatt, MPs in Chancellor Angela Merkel's governing conservative party are mulling a move to permit countries to exit the eurozone without leaving the EU.

A motion from a group of lawmakers, which calls for any country's departure to be on a voluntary basis, is set to be discussed at the Christian Democrats' (CDU) party congress next week, Handelsblatt said.

Key lesson from Iceland crisis is 'let banks fail': analysts

REYKJAVIK - Three years after Iceland's banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.

The North Atlantic island saw its three biggest banks go belly-up in the October 2008 as its overstretched financial sector collapsed under the weight of the global crisis sparked by the crash of US investment giant Lehman Brothers.

The banks became insolvent within a matter of weeks and Reykjavik was forced to let them fail and seek a $2.25 billion bailout from the International Monetary Fund.

After three years of harsh austerity measures, the country's economy is now showing signs of health despite the current global financial and economic crisis that has Greece verging on default and other eurozone states under pressure.

"The lesson that could be learned from Iceland's way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible," Islandsbanki analyst Jon Bjarki Bentsson told AFP.

"Even if our way of dealing with the crisis was not by choice but due to the inability of the government to support the banks back in 2008 due to their size relative to the economy, this has turned out relatively well for us," Bentsson said.

Iceland's banking sector had assets worth 11 times the country's total gross domestic product (GDP) at their peak.

Nobel Prize-winning US economist Paul Krugman echoed Bentsson.

"Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net," he wrote in a recent commentary in the New York Times.

"Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver," he said.

During a visit to Reykjavik last week, Krugman also said Iceland has the krona to thank for its recovery, warning against the notion that adopting the euro can protect against economic imbalances.

"Iceland's economic rebound shows the advantages of being outside the euro. This notion that by joining the euro you would be safe would come as news to the Spaniards," he said, referring to one of the key eurozone states struggling to put its public finances in order.

Iceland's example cannot be directly compared to the dramatic problems currently seen in Greece or Italy, however.

"The big difference between Greece, Italy, etc at the moment and Iceland back in 2008 is that the latter was a banking crisis caused by the collapse of an oversized banking sector while the former is the result of a sovereign debt crisis that has spilled over into the European banking sector," Bentsson said.

"In Iceland, the government was actually in a sound position debt-wise before the crisis."

Iceland's former prime minister Geir Haarde, in power during the 2008 meltdown and currently facing trial over his handling of the crisis, has insisted his government did the right thing early on by letting the banks fail and making creditors carry the losses.

"We saved the country from going bankrupt," Haarde, 68, told AFP in an interview in July.

"That is evident if you look at our situation now and you compare it to Ireland or not to mention Greece," he said, adding that the two debt-wracked EU countries "made mistakes that we did not make ... We did not guarantee the external debts of the banking system."

Like Ireland and Latvia, also rescued by international bailout packages and now in recovery, Iceland implemented strict austerity measures and is now reaping the fruits of its efforts.

So much so that its central bank on Wednesday raised its key interest rate by a quarter point to 4.75 percent, in sharp contrast to most other developed countries which have slashed their borrowing costs amid the current crises.

It said economic growth in the first half of 2011 was 2.5 percent and was forecast to be just over 3.0 percent for the year as a whole.

David Stefansson, a research analyst at Arion Bank, told AFP Iceland hiked its rates because it "is in a different place in the economic (cycle) than other countries.

"The central bank thinks that other central banks in similar circumstances can afford to keep interest rates low, and even lower them, because expected inflation abroad is in general quite (a bit) lower," he said.

Eurozone agrees to unlock 8b euro loan for Greece

BRUSSELS: Eurozone finance ministers on Friday agreed to unlock an eight-billion-euro slice of aid to help debt-laden Greece, EU diplomats said.

Ministers of the 17-nation eurozone "have given their agreement for the sixth tranche of aid to Greece," the diplomat said, referring to debt funding provided in a 110-billion-euro rescue package for Greece agreed in May 2010.

A second diplomat confirmed the breakthrough.

The tranche of aid is crucial for debt-stricken Greece which faced running out of money to pay civil servants and pensions in mid-November.

It had been blocked since mid-September as a team of EU, European Central Bank and International Monetary Auditors scrutinised the Greek government's reform efforts.

On Thursday, the Greek parliament approved a controversial government list of even tougher austerity measures demanded by the auditors and which have sparked violent street protests.

Some 35,000 people gathered in Athens on the second day of a general strike on Thursday that crippled the public sector and much of the country.

The protests turned violent and police said a man in his fifties died in hospital. Authorities declined to speculate on the cause of death, but Greek media said he was hurt on the sidelines of the protests.

Another key sticking point is how much of Greece's debt mountain can safely be written off without spreading the debt crisis to other under-pressure economies such as Italy and Spain.

This pivotal point, however, is unlikely to be resolved before a meeting of EU leaders on Wednesday, amid differences between France and Germany over the "haircut" to be applied to Greece's 350 billion euros of debt.