In blow to Greece, ECB restricts banks' access to cash

FRANKFURT - The European Central Bank on Wednesday cut off Greek banks' access to a key source of much-needed cash, piling fresh pressure on the country's new government to reach a deal with international creditors.

In a decision that rattled financial markets, the ECB said it would no longer allow Greek banks to use government debt, which has a junk rating, as collateral for loans.

The announcement came just hours after new Greek Finance Minister Yanis Varoufakis held his first talks with ECB chief Mario Draghi as part of the country's push to renegotiate Athens' 240-billion-euro ($270 billion) EU-IMF bailout.

Stock markets fell on the news, while the euro tumbled by more than one percent against the dollar.

The ECB move will likely feature heavily in Varoufakis's keenly-awaited first talks with German Finance Minister Wolfgang Schaeuble on Thursday, whose country is seen as the strongest opponent of any easing in the terms of the massive debts Greece has built up.

Both Prime Minister Alexis Tsipras and Varoufakis -- whose far-left Syriza party stormed to victory in elections on January 25 -- have been touring Europe in recent days to build support for a new debt agreement with creditors.

Elected on a pledge to end austerity policies imposed on Greece as part of its bailout, Tsipras faces the delicate task of convincing his European partners to reverse course while ensuring Athens still gets the aid required to avoid a default.

In Brussels, Tsipras struck an upbeat note after talks with European Commission chief Jean-Claude Juncker and EU president Donald Tusk, saying he was optimistic of a "viable and mutually acceptable solution".

A Greek government source said Tsipras and Juncker discussed plans to "jointly" create a four-year reform plan for Greece, as well as a bridging deal to give Athens time to draw up plans for reforms including on corruption and tax evasion.

But Tusk acknowledged that resolving the showdown over Greece's debt was likely to be "difficult" and needed "cooperation and dialogue as well as determined efforts by Greece."

'Fruitful' ECB talks

Ahead of the ECB talks in Frankfurt, Varoufakis told the German weekly Die Zeit that the ECB "should support our banks so that we can stay afloat", acknowledging that Greece was "a bankrupt country".

The former economics professor later described his talks with Draghi as "very fruitful".

But after a meeting of its policy-setting governing council late Wednesday, the ECB said it was taking the step to end the special waiver for Greece because "it is currently not possible to assume a successful conclusion of the programme review".

The waiver, which will end on February 11, had allowed banks to pledge their Greek bonds as collateral, even though the securities did not meet standards for a minimum credit rating.

Separately, a Financial Times report suggested that Draghi might block a key element of Athens' plan.

According to the FT, which cited officials involved in the deliberations, the ECB is refusing to raise an agreed cap on the amount of short-term treasury bills that Athens can issue from 15 billion euros to 25 billion euros.

Greece faces key payments on its debt at the end of February and again at the end of May.

Next stop: Berlin

The International Monetary Fund -- the third part of the so-called "troika" that oversees Greece's bailouts along with the European Commission and ECB -- said meanwhile it was not in debt talks with the Greek government.

The new Greek government has blamed its fiscal problems mainly on the austerity shackles fixed by German Chancellor Angela Merkel.

Athens says these restrictions have choked growth in an economy that has shrunk by a quarter, failed to cut unemployment that stands at over 25 percent, and made it impossible to service a mountain of debt worth 1.75 times its annual economic output.

But Merkel tried to squash the talk that Syriza could play on divisions within Europe, insisting that there were no substantial differences between major eurozone nations.

"I don't think that the positions of the member states of the eurozone with regard to Greece differ, at least in terms of substance," Merkel said.

In a bid to quell western worries over the new Greek government's closeness to Russia at a time of Cold War-style tensions, Varoufakis said meanwhile that Athens would "never" seek loans from Moscow.

Greece's defence minister Panos Kammenos also told AFP that Athens remained committed to its NATO role despite its relationship with Russia.

Greece's political turmoil continued at home in the meantime, as judges sent 72 members of neo-Nazi party Golden Dawn, including its leaders, for trial for crimes including murder.

source: www.abs-cbnnews.com

NG debt rises 9pct in November

MANILA, Philippines - The national government's outstanding debt grew an annual 9% to P5.381 trillion in November on higher domestic borrowings.

Data from the Bureau of Treasury showed 63% or P3.406 trillion of total borrowings were owed to local investors, while the remaining P1.975 trillion were sourced from foreign entities.

Domestic debt in November went up by 20%, while external debt fell 5%.

source: abs-cbnnews.com

European deal ignites rally in global stocks, euro

NEW YORK - A long-awaited plan to staunch the European debt crisis sparked euphoria across financial markets on Thursday, driving up the euro and the price of world stocks and commodities, while thrashing the dollar.

Major US stock indices, which had been close to bear territory in the summer because of the debt crisis, climbed back into the black for 2011, with the benchmark S&P 500 on track to post its biggest monthly gain since 1974.

Metal prices jumped 5 percent or more, US oil rose more than 4 percent and the euro gained more than 2 percent after European leaders agreed to a sweeping plan to resolve a crisis that has threatened to push the US and other economies back into recession.

The dollar took its biggest beating against a broad range of currencies in 2-1/2 years and investors spurned safe-haven US government debt, pushing bond prices down and benchmark yields to their highest in 2-1/2 months.

The deal reached in Brussels envisions a recapitalization of European banks, a far more powerful rescue fund for the euro zone and 50 percent losses for Greek debt holders.

For the moment, investors shrugged off the fact that key aspects of the deal, including the mechanics of boosting the firepower of the European Financial Stability Facility and providing Greek debt relief, could take weeks to finalize.

Three months ago, euro zone leaders unveiled another agreement that also was meant to resolve the festering crisis.

"This is not a magic elixir. It's a very good start and certainly more than people had expected," Bill O'Neill, partner at commodity investment firm LOGIC Advisors, said of the deal.

The euro surged past stop-loss points as investors reacted positively, gaining 2.2 percent to $1.4190. Investors were forced to unwind bets against the single currency as they awaited more details.

World stocks extended gains to hit their highest level since early August, with the MSCI all-country equity index rising 4.3 percent.

US stocks rallied more than 3 percent, and in a sign of investor relief, Wall Street's "fear gauge," the CBOE Volatility Index, fell 15 percent.

The Dow Jones industrial average ended up 339.51 points, or 2.86 percent, at 12,208.55. The Standard & Poor's 500 Index rose 42.59 points, or 3.43 percent, to 1,284.59.

The Nasdaq Composite Index gained 87.96 points, or 3.32 percent, to 2,738.63

Data showing the U.S. economy grew at its fastest pace in a year in the third quarter as consumers and businesses stepped up spending also helped spur risk appetite.

US gross domestic product expanded at a 2.5 percent annual rate in the third quarter, the Commerce Department said.

Emerging market shares, as measured by MSCI, surged 4.0 percent. European shares soared to their highest close in 12 weeks, with French banks, heavily exposed to euro zone peripheral debt, among the biggest gainers.

Credit Agricole gained 22 percent and BNP Paribas shot up 17 percent.

The FTSEurofirst 300 index of top European shares ended the session up 3.7 percent at 1,020.10, the highest close since Aug. 3.

Crude oil jumped to $112 a barrel as the European debt deal and supportive U.S. data eased concerns that economic weakness could curb energy demand.

ICE Brent December crude closed up $3.17 to settle at $112.08 a barrel, while U.S. light sweet crude oil rose $3.76 to settle at $93.96 a barrel.

The dollar appeared the biggest loser from the deal, which could refocus attention on the weak US fiscal state.

Government debt prices tumbled.

The benchmark 10-year US Treasury note was down 47/32 in price to yield 2.38 percent.

Spot gold prices rose $18.65 to $1,742.40 an ounce.

US gold futures for December delivery settled up $24.20 at $1,747.70 an ounce.

However, some strategists were leery of the outcome of the crisis in Europe.

"Decisions have been made, whatever they are, and that's a good thing. I fear further down the road we'll find they're not as good as we thought," said Gavin Launder, fund manager at Legal & General, which has 356 billion pounds ($570 billion) under management. — Reuters

Source: gmanews.tv