Euro plummets to 7-calendar year lower as Greece blinks in debt negotiations
Athens will submit a request for a loan extension breaking temporary deadlock in negotiations with Europe’s creditors 
It’s another deadline day for Greece as time runs out to thrash out an extension of its bail-out
Photo: Bloomberg
• Athens confirms it will make a request for a six-month loan extension tomorrow
• ECB meets to decide on funding for Greece’s banks
• How the ECB could finally pull the trigger on a Grexit
• Athens refuses to accept ‘psychological blackmail’
• FTSE hits 15 year high on Greece hopes
18.00 The Greek government is currently in the middle of electing their new president. Parliamentarians are unlikely to hear of the outcome of the ECB’s decision on supporting Greek banks however.
There are more rumours around that the central bank won’t in fact be putting out a statement on ELA at all tonight.
17.20 The ECB are meeting right now to decide whether they will continue to give emergency liquidity to prop up Greek banks.
An acceleration in deposit withdrawals in recent weeks has already forced the ECB to raise the ceiling on ELA for Greek lenders.
Bloomberg is reporting the central bank could now move to increase the cap once again, which is opposed by Germany’s Jens Weidmann.
17.15 Yanis Varoufakis has now confirmed those comments made by Jack Lew, US Treasury Secretary.
US Treasury Sec did indeed tell me that nonagreement would damage Greece. He added that it would also damage Europe. Advice to both sides!
— Yanis Varoufakis (@yanisvaroufakis) February 18, 2015
16.30 It’s the end of the day in Greek markets, and despite very early hopes that saw the Athens Stock market rise by more than 2pc this morning, Greek stocks have fallen back to close 1pc up.
16.05 Brinkmanship over Greece’s bail-out have echoes of 2012, when the country had to undergo the biggest private sector debt restructuring in history, according to ratings agency Fitch.
They are warning that “t he damage to investor, consumer, and depositor confidence is increasing downside risks to growth and Greece’s incipient economic recovery. It may take time to repair even if agreement with official creditors is reached in the coming days or weeks.”
Three years ago, when fears of a Grexit reached their peak, Greek banks lost around 30pc of their deposits between May and June 2012.
15.50 The United States has again warned of the consequences of a Greek exit from the euro and urged the two parties to come to some agreement.
Speaking to his Greek counterpart today, Treasury Secretary Jack Lew is reported to have told Yanis Varoufakis that Greece would face “immediate hardship” should the deadlock between its creditors not be broken.
The intevention follows earlier comments from Barack Obama about the harm austerity policies were having on Europe’s struggling economies.
“You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts,” he said earlier this month” President Obama said earlier this month.
15.30 Greece will run out of money in just over a week without any additional source of funds, according to a report released from Reuters today.
The country is due to make a €1.5bn loan repayment to the International Monetary Fund in March, but would need extra funding should it bail-out expire, according to Reuters source.
“Greece can cover its needs until mid-March or the latest by the end of March unless it secures additional funding from official lenders,” the person told Reuters.
14.55 Looking increasingly unlikely that we will hear from the ECB today, reports Bruno Waterfield from Brussels.
I hear from Brussels sources that ECB statement on Greece & ELA is highly unlikely today. If it comes it’ll be late evening…
— Bruno Waterfield (@BrunoBrussels) February 18, 2015
14.50 What are the prospects of Greece coming to a workable compromise over its future?
OpenEurope have done a useful summary of the demands currently on the table from Athens (such as a new loan deal, suspension of their Memorandum of Understanding, and renegotiation of a third of reforms) and where their creditors are digging in their heels.
They calculate the Greeks have a good chance of gaining some budgetary concessions from the eurozone, but have far less hope agreeing to reverse labour market reforms, pensions, and privitsing the country’s assets.
Read it in full from the link below.
Very useful @OpenEurope summary of the Greece & eurozone stand off http://t.co/d5xVmZg9ZI
— Bruno Waterfield (@BrunoBrussels) February 18, 2015
14.35 That ECB meeting we’re all waiting the outcome of? Hasn’t started yet.
#ECB ELA RT @bntoussaint : @FGoria the meeting havn’t started yet
— Yannis Koutsomitis (@YanniKouts) February 18, 2015
14.15 France is working towards a Greek agreement to be sealed by the end of the week, according to finance minister Michel Sapin.
Mr Sapin has struck a more conciliatory tone towards Athens than some of his northern European counterparts, and speaking to his cabinet today, has said the EU will do everthing it can to secure a deal.
“France’s objective is for a deal to be reached with #Greece by the end of the week” says French FinMin Michel Sapin during cabinet meeting.
— Maxime Sbaihi (@MxSba) February 18, 2015
14.10
Greek stock market near lows of the day. Up less than 1%.
— Joseph Weisenthal (@TheStalwart) February 18, 2015
13.50 We’re still waiting on a decision from the European Central Bank, which is meeting to decide whether it will continue providing vital life support for Greek banks.
The ECB can continue to fund Greek lenders if they remain solvent and are in some form of a bail-out programme. Cutting off the ELA as it is known, would effectively dump the country out of the single currency.
One of the biggest worries is the rate of deposits being withdrawn from banks. The central bank has already raised the cap on ELA in the face of people continuing to withdraw their money as fears of an impasse grow.
According to Lorcan Roche Kelly at Bloomberg, Greece’s ELA usage is around €57.5bn – €7.5 billion short of the current ECB cap. The ceiling could potentially need be raised by the bank today to keep Greek banks solvent.
13.40 Mr Varoufakis may have become a media darling in recent weeks, but the ‘rock-star’ finance minister might not be ingratiating himself with his European counterparts, according to a report from the Wall Street Journal.
On culture clash between Greek Finance Minister Varoufakis and his eurozone peers: http://t.co/ybo5MYvHNE (fixed)
— Wall Street Journal (@WSJ) February 18, 2015
13.35 Should no emergency Eurogroup meeting be called for the end of the week, the Greeks will request an extraordinary meeting of EU leaders instead.
Speaking to a local radion station, Alekos Flamboraris, an aid of the Greek PM said the situation was “political” and could demand such a summit of Europe’s leaders.
On Monday however, the Eurogroup said the president of the European Council had no plans to call a summit.
13.08 Happy marital news from the eurozone!
EU Commission President Juncker announces marriage of son to ASEAN President’s daughter. Progeny to inherit global regulatory empire.
— Eurohand News (@eurohand_org) February 18, 2015
13.05 That extension request could now get the ball rolling on an emergency Eurogroup meeting for Friday.
From head of the finance ministers group, Jeroen Dijsselbloem:
DJ Eurozone Finance Ministers May Meet Friday If Greeks Submit “Credibly Worded Request” – Official
— Julie VerHage (@julieverhage) February 18, 2015
13.00 Confirmation that Greece’s loan extension will be submitted to the Eurogroup on Thursday and not today as initially thought.
#Greek government spokesman Gabriel Sakkelarides says official request for loan extension will be sent to #Eurogroup on Thursday morning
— Sky News Newsdesk (@SkyNewsBreak) February 18, 2015
12.50 Grexit? What Grexit? The probability that Greece will be dumped out of the euro has fallen significantly in recent days, according to analysis from Fathom Consulting.
Based on the gyrations in the bond markets, Fathom calculate the probability of an exit has dropped back to just 21pc compared with 84pc last week (green line below):
12.40 Markets seems to be taking very well to today’s news from Europe. European stocks have climbed to a seven-year high, despite there being lots of uncertainty behind the actual ground ceded by Greece in today’s proposals.
The Stoxx Europe 600 index is now trading at its highest level since 2007, while 17 of the 18 continental stocks are in the green so far today.
12.28 Fighting talk from vice-president of the Commission today, who doesn’t sound like the biggest fan of Greece’s finance minister.
Commissioner Dombrovskis isn’t messing around – accuses Greek FinMin Varoufakis of trying to drive a wedge between EU Commission & Eurogroup
— Mats Persson (@matsJpersson) February 18, 2015
12.21
It’s clear (according to @VDombrovskis ) that Greece needs to climb down, on social reform votes & troika programme review before a deal
— Bruno Waterfield (@BrunoBrussels) February 18, 2015
Crystal clear. @VDombrovskis says Greece well aware that way forward is to extend the existing programme with conditions
— Bruno Waterfield (@BrunoBrussels) February 18, 2015
12.20 European Commission chief Jean-Claude Juncker has been speaking to a German magazine this morning, and is urging Greece to stick by its existing commitments.
And in another about turn for the already convoluted language that is eurospeak, Mr Juncker thinks a bailout extension could also act as a “bridge”. Hmmm
I am working together with Eurogroup President Jeroen Dijsselbloem to achieve an extension of the existing programme, in order to bridge the time until summer.”
It goes without saying that all the financial obligations to the European and international partners must be respected”.
12.15 According to the leader of Greece’s opposition Potami party Athens will formally make its request for a loan extension on Thursday.
In which case, this would suggest a Eurogroup meeting would be convened for Friday as originally penciled in.
Potami leader Theodorakis says has been briefed by PM Tsipras on #Greece ‘s loan extension request; to be sent Thurs
— Yannis Koutsomitis (@YanniKouts) February 18, 2015
12.10 A further Eurogroup meeting could now take place tomorrow. This would be a working group of the finance ministers, in preparation for the full-blown thing on Friday.
Greek media reporting of an extra Eurogroup Working Group meeting on Thursday. #Greece
— Yannis Koutsomitis (@YanniKouts) February 18, 2015
12.00 Our man in Brussels has some words on the Greek drama from Commission vice-president Valdis Dombrovskis.
He has repeated the EU is working towards extending Greece’s current bail-out programme, rather than Athens demands for a “loan agreement.”
Eurogroup was clear, extend existing programme with conditionality, some flexibility on conditions, @VDombrovskis
— Bruno Waterfield (@BrunoBrussels) February 18, 2015
BREAKING EU commission repeats:”what we are doing is working on an extension of the current (Greek) program” @VDombrovskis
— Tony Connelly (@tconnellyRTE) February 18, 2015
11.25 Today’s news has sent the single currency careering to a seven-year low against the pound. One euro is now worth about 73p.
Euro hits a seven-year low against the pound – get those holidays booked!
— Alasdair Pal (@AlasdairPal) February 18, 2015
11.15 Greece’s negotiating position may not have changed substantially from what we knew on Monday, when the government rejected proposals for an extended bail-out from the Eurogroup.
Nevertheless, there are positive signs coming from Germany of all places, that Greece is “ready to negotiate.”
#Germany economy minister Gabriel says welcomes signal from Greek government that it is ready to negotiate ~RTRS /via @FGoria #Greece #euro
— Yannis Koutsomitis (@YanniKouts) February 18, 2015
11.00 In short, this is what the Greek demands for a “bridging” agreement look like (from the released proposals):
To solve short run liquidity problems, the government foresees an agreement on a combined involvement of the Eurosystem and its ELA program (in relation to the issuance of T-bills), of the IMF through new disbursements and of the Eurogroup for allowing the release of the unused HFSF resources.
We are confident that such an agreement can be reached on the basis of the sufficient common grounds identified with the three institutions on the content of the current MoU. ”
10.45 Some excerpts from Yanis Varoufakis’ presentation to the eurogroup at the aborted meeting on Monday:
Here’s what Greece is promising its creditors in return for a “bridge” arrangement:
• The Greek government reiterates its commitment to the terms of its loan agreement to all our creditors
• The Greek government takes no action that threatens to derail the existing budget framework or that has implications for financial stability
• The Greek government will take no action toward a haircut of its loans’ face value
Regarding the specifics of the short term financing, or of the above conditionalities, we believe that these technical issues can be resolved within a day or two, as long as the political will is present. In any case, let me remind you that we are talking about a short space of a few months of stability that is necessary to establish the parameters of the longer term framework within which Greece and Europe and the IMF will establish so as to put Greece on a sustainable path.
The Greek authorities are determined to use these few months effectively, as opposed simply to buying time for the purpose of doing little.”
10.15 The Greek finance ministry have published in full the proposals Yanis Varoufakis made to the eurogroup earlier this week.
You can read them in full here.
09.55 Whether or not today’s decision for Greece to ask for a loan extension is a real breakthrough remains questionable. But markets are taking it all as a positive.
Athens main index has added 0.4pc this morning, while yields on three-year Greek debt have fallen back.
09.40 A small but crucial difference in today’s talks. In asking for an extension of a “loan agreement” rather than the existing bail-out , Athens is resisting conforming to the conditions that have been imposed on the country since 2012.
In particular, the government wants to do away with around a third of the reforms they have been asked to carry out. In requesting an extended period of money, without the same tough conditionality, Greece is still far away from satisfying the position held by its northern creditors.
German Finance Minister Wolfgang Schaeuble said yesterday: “It’s not about extending a credit programme but about whether this bailout programme will be fulfilled, yes or no.”
Reminder: the difference between extending the *loan* and extending the *bailout* is roughly everything.
— Charles Forelle (@charlesforelle) February 18, 2015
09.25 “ Greece has blinked first”, according to Christian Schulz at Berenberg, but it still might no be enough to satisfy its creditors, particularly Germany.
Yanis Varoufakis, Greece’s finance minister, is still refusing to accept all the original conditions attached to the existing bail-out programme, and without any further concessions on what Greece is or is not willing to do on reforms, an agreement before February 28 still looks unlikely.
From Mr Schulz (emphasis in bold):
Greece refuses to accept the reform programme on which the loans are based. It wants the money but rejects many of the strings attached to it. That is simply a non-starter as German finance minister Schäuble yesterday evening.
Chances have risen a bit that Greece may back down further and that the Eurogroup will agree on a way to extend the programme on Frid ay in time for the Eurozone to ratify it ahead of the 28 Feb ruary deadline. But it remains a close call.
A Greek suggestion to not take steps that would directly endanger fiscal targets but go ahead with reversals of structural reforms does not come close to what creditors could accept.
09.15 The ECB’s meeting commenced at 8am this morning; some decision is due shortly.
The key issue is whether the ECB thinks debt talks are at such a stage that they can continue in their provision of emergency funding for Greece’s struggling lenders.
This ELA is the last remaining link between the country’s lenders and the eurozone, but pulling it would require a two-thirds majority in the governing council. That’s unlikely to happen according to most analysts, particularly as we’ve had some movement towards a compromise this morning.
While #Greece requesting extension is positive, just looking to extend credit but not conditions doesn’t really bring sides much closer
— Open Europe (@OpenEurope) February 18, 2015
09.05 The early morning news from Athens is that the Syriza government has confirmed it will make a request to extend the country’s existing bail-out agreement past the end of the month.
This was a key sticking point between the country and its European creditors at a failed meeting on Monday. There aren’t many details on what exactly the conditions attached to the extension are yet, but markets are pleased.
#Greece government spokesman confirms Athens will submit request for loan extension today
— Joshua Raymond (@Josh_CityIndex) February 18, 2015
09.00 Hello and welcome to today’s coverage of the Greek debt drama.
It’s another crucial day with events centred in Frankfurt today as the European Central Bank will meet to decide whether they will continue to provide support for Greek banks.