Asia FX By Cornelius Luca - Tue 20 Nov 2012 16:47:35 CT (Source:CME/www.lucafxta.com)
The appetite for risk paused on Tuesday after a nice recovery on Monday, as Moody's cut of France's triple-A credit rating triggered fears of a downgrade for other top-rated nations. Moreover, Fed Chairman offered no hints of additional easing despite a disappointing economic recovery; of course, there was no surprise there. Following Thanksgiving, the markets will focus on the negotiations between President Barack Obama and congressional leaders to avoid the "fiscal cliff." These hopes are over optimistic. The European currencies ended up and the commodity currencies and yen down after most of the European and commodity currencies surged and the yen fell on Monday. The US stock indexes ended little changed. Gold, oil and silver closed down. The short-term outlook for the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on most foreign currencies. Good luck!
Overnight
US: housing starts climbed 3.6% to a seasonally adjusted annual rate of 894,000 in October from the revised September estimate of 863,000. Meanwhile, building permits fell 2.7% to a seasonally adjusted annual rate of 866,000 in October from a revised 890,000 in September.
Today's economic calendar
Japan: Merchandise trade balance total for October
China: Leading economic index for October
Asia Stocks Advance as U.S. Housing Boosts Export Outlook (Bloomberg)
Asian stocks gained as U.S. home building rose to a four-year high, adding to signs the world’s biggest economy is recovering and boosting the outlook for the region’s exporters. Toyota Motor Corp. (7203), the world’s biggest carmaker, climbed 2.1 percent in Tokyo. WestSide Corp. jumped 5.2 percent in Sydney after the developer of coal seam gas said it received a takeover proposal. Harvey Norman Holdings Ltd. fell 1.4 percent after the Australian Competition and Consumer Commission initiated legal proceedings against 11 franchisees of the nation’s largest electrical-goods retailer.
The MSCI Asia Pacific Index (MXAP) rose 0.3 percent to 121.29 as of 9:39 a.m. Tokyo time before markets in China and Hong Kong open. The gauge is heading for its first advance in three weeks after President Barack Obama started talks with Republicans and Democrats on a U.S. budget agreement to avert the so-called fiscal cliff. Failure to strike a deal will trigger more than $600 billion in automatic tax increases and spending cuts that may throw the country into a recession. “Underlying economic data in the U.S. has been pretty good,” said Angus Gluskie, managing director at Sydney-based White Funds Management, which oversees more than $350 million. “We’re going to have to see much more compromise before the fiscal cliff is resolved before this rally can continue.”
Asian Stocks Rise on U.S. Data as Yen Slides to Seven-Month low (Bloomberg)
Asian stocks rose as an increase in U.S. housing starts added to signs the world’s largest economy is recovering. The yen weakened to a seven-month low as Japan’s exports fell more than expected, while oil advanced. The MSCI Asia Pacific Index (MXAP) added 0.3 percent as of 9:34 a.m. in Tokyo. Japan’s Nikkei 225 Stock Average climbed 0.9 percent, heading for a two-month high. Standard & Poor’s 500 Index futures were little changed. The yen slid against all 16 major peers. Oil rallied 0.7 percent in New York after slumping 2.8 percent yesterday. U.S. new-home construction climbed to a four-year high in October, exceeding all estimates in a Bloomberg survey. Japan’s exports dropped for a fifth month, pushing the world’s third- largest economy closer to recession. European finance ministers continued to meet to try and plug a hole in Greece’s budget.
Oil for January delivery rose to $87.32 in New York as the American Petroleum Institute said crude inventories slid 1.9 million barrels last week. Secretary of State Hillary Clinton will shuttle today through Jerusalem, the West Bank and Cairo in a bid to salvage a proposed cease-fire intended to halt a weeklong torrent of Palestinian rockets and Israel air strikes. A gauge tracking consumer discretionary companies advanced the most among 10 industry groups on the Asia-Pacific equities gauge, while health-care companies declined. South Korea’s Kospi index added 0.4 percent, while Australia’s S&P/ASX 200 Index retreated 0.1 percent. In the U.S., the S&P 500 closed little changed. Hewlett- Packard Co. (HPQ) fell 12 percent as it announced a charge of $8.8 billion linked to its Autonomy Corp. business, saying there were “accounting improprieties” before its takeover of the company.
Topix Heads for Highest Since July on U.S. Housing, Yen (Bloomberg)
Japanese stocks gained, with the Topix (TPX) Index heading for its highest close since July, as new U.S. home construction rose to a four-year high and the yen weakened after Japan posted a trade deficit for a fourth month. Canon Inc., a camera maker that gets 80 percent of its revenue overseas, rose 1.4 percent. Kansai Electric Power Co. gained 1.3 percent after the Nikkei newspaper reported the utility plans to raise power rates. Japan Steel Works Ltd. sank 2.8 percent after SMBC Nikko Securities Inc. cut its equity rating on the machinery maker to underperform. The Topix gained 0.8 percent to 767.75 as of 9:22 a.m. in Tokyo, with more than three shares advancing for each that fell. The Nikkei 225 Stock Average (NKY) rose 0.9 percent to 9,224.01, with volume almost 10 percent below the 30-day intraday average.
“The foundations have been laid for a significant recovery in the U.S.,” said Peter Esho, chief market strategist at City Index Ltd., a provider of equities, bonds and currency trading in Sydney. “There is cause for some optimism. The housing market is finally starting to improve.” The Topix has risen 6.4 percent since Nov. 14 when Prime Minister Yoshihiko Noda called for elections that polls show the opposition party is likely to win. The price of shares on the gauge stood at 0.9 times book value, compared with 2.1 times for the Standard & Poor’s 500 Index and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.
S&P 500 Erases Earlier Loss as Housing Report Tempers HP (Bloomberg)
The Standard & Poor’s 500 Index advanced, erasing earlier losses, as an increase in housing starts tempered a tumble in Hewlett-Packard Co. (HPQ) shares. Bank of America Corp. and American Express Co. added at least 1.1 percent to pace gains in the biggest companies. HP (HP) fell 12 percent as it announced a charge of $8.8 billion linked to its Autonomy Corp. business, saying there were “accounting improprieties” before its takeover of the company. Best Buy Co. (BBY) sank 13 percent as the largest consumer-electronics retailer reported a $10 million loss on weaker-than-expected sales. The S&P 500 (SPX) rose 0.1 percent to 1,387.82 at 4 p.m. New York time, after falling 0.7 percent earlier. It had rallied 2.5 percent over the previous two days. The Dow Jones Industrial Average slid 7.45 points, or 0.1 percent, to 12,788.51. Volume for exchange-listed stocks in the U.S. was 5.6 billion shares, or 7.8 percent below the three-month daily average.
“There will be this back and forth,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a phone interview. His firm oversees $646 billion. “People are coming to the realization that earnings growth is not going to be as robust as analysts had expected. That’s starting to creep in. On the other hand, housing is strengthening. As for Europe, ultimately, they will do what it takes to support Greece.” New-home construction unexpectedly climbed to a four-year high in October, more evidence of a revival in the industry that’s helping propel the U.S. economy. The euro traded at almost a two-week high against its U.S. counterpart as the region’s finance ministers met in Brussels to discuss ways to plug a 15-billion euro ($19 billion) hole in Greece’s finances.
Recap Stock Index Market Report (CME)
The December S&P 500 experienced a choppy trading session that spent most of in close proximity to unchanged levels. The market came under modest pressure in early morning action in the wake of a downgrade to France's credit rating and disappointing earnings. Meanwhile, a much better than expected reading on October US housing starts helped turn sentiment and fueled a turnaround in the December S&P 500 to a higher high on the session. Some traders indicated that the upside in US equities was being held back by a more than 10% slide in the shares of Hewlett-Packard after the company reported an unexpected charge from its purchase of Autonomy. Shares of Best Buy were down an equivalent amount during the session after posting quarterly results that fell short of street estimates. The market took an early afternoon slide to a fresh low on the session in response to comments from Fed Chairman Bernanke indicating that the bank lacked the tools to fully offset damages if a deal on the fiscal cliff was not reached.
European Stocks Gain Amid Speculation of Greek Aid Deal (Bloomberg)
European stocks rose for a second day amid speculation the region’s finance ministers will agree on a Greek financing deal and optimism Israelis and Palestinians will sign up to a cease-fire in Gaza. EasyJet Plc (EZJ) jumped to the highest level in five years, leading travel shares higher, after the budget airline doubled its dividend. Xstrata Plc (XTA) and Glencore International Plc (GLEN) advanced as investors approved their $31 billion merger. Credit Suisse Group AG (CSGN) paced a decline in financial shares, dropping 1.7 percent on plans to reorganize its investment bank. The Stoxx Europe 600 Index (SXXP) added 0.3 percent to 269.49 at the close of trading, extending yesterday’s 2.2 percent jump to reach a one-week high. The gauge, which fluctuated between gains and losses at least 10 times today, has rallied 15 percent from a June 4 low as the European Central Bank announced an unlimited bond-buying plan and the Federal Reserve began a third round of asset purchases.
“The market has rebounded on talk that there will be a cease-fire in Israel,” said Stephane Ekolo, chief European strategist at Market Securities, in London. “There also is the possibility of a resolution regarding Greek debt in tonight’s meeting and that is helping stocks.” European finance ministers are discussing ways to fill a 15 billion-euro ($19.2 billion) gap in Greece’s public accounts at a meeting in Brussels today. The options under consideration include recycling ECB profits on Greek bonds, charging Greece lower interest rates and extending repayment deadlines.
Yen Sinks to 7-Month Low Against Dollar on Posting Trade Deficit (Bloomberg)
The yen slid to a seven-month low after Japan posted a trade deficit for a fourth-straight month, pushing the nation closer to a recession and eroding the currency’s safe-haven status. The euro was near a two-week high against the dollar as European finance ministers continued to work toward an agreement on extra financing for Greece. New Zealand’s dollar remained lower against most of its major peers after whole milk powder prices fell, diminishing revenue from a key export. “The trade numbers have added to the case for yen weakness,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “The struggles of the Japanese exporters are becoming increasingly clear.” The yen touched 81.84 per dollar, the weakest since April 10, before trading at 81.82 as of 9:17 a.m. in Tokyo, 0.2 percent lower from yesterday’s close. It lost 0.2 percent to 104.85 per euro. Europe’s shared currency traded at $1.2814 from $1.2817 yesterday, when it touched $1.2830, the highest since Nov. 7.
Japanese exports fell 6.5 percent in October from a year earlier, leaving a trade deficit of 549 billion yen ($6.7 billion), the Ministry of Finance said in Tokyo today. The median estimate of economists surveyed by Bloomberg News was for a 360 billion yen deficit.
Asia’s Top Economies Aim for Trade Deal as Sea Dispute Set Aside (Bloomberg)
China, Japan and South Korea started talks on a free-trade agreement vital to an Asia-wide deal in a move to forge closer economic ties even as they spar over disputed islands. The countries, representing three of Asia’s four biggest economies, will hold the first round of talks early next year, according to Xinhua, China’s official news agency. Those negotiations are key to the Regional Comprehensive Economic Partnership, a 16-nation accord also announced yesterday that Southeast Asian countries called “the world’s biggest regional free trade deal.” “The missing piece of the jigsaw puzzle as far as Asia is concerned is the agreement among the three Northeast Asian countries,” said John Ravenhill, a professor at Canberra-based Australian National University. “The negotiations that were supposed to have started between those three countries have been put on hold because of the disputes over the South China Sea and other islands.”
Competing visions for an Asia-Pacific trade bloc reflect the struggle for dominance by economic powers over a region that is increasingly a driver of global growth. U.S. President Barack Obama is seeking to expand trade ties with Asian nations and regain economic influence among countries that are growing more reliant on China in an area that contains sea lanes vital to world commerce
Bernanke Says Fiscal Cliff Fix May Bring ‘Very Good’ Year (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said an agreement on ways to reduce long-term federal budget deficits could remove an impediment to growth, while failure to avoid the so-called fiscal cliff would pose a “substantial threat” to the recovery. “There’s important potential for the economy to strengthen significantly if there’s a greater level of security and confidence about where we’re going,” he said today to the Economic Club of New York. “A plan for resolving the nation’s longer-term budgetary issues without harming the recovery could help make the new year a very good one for the American economy.” Bernanke, 58, identified the threat of $607 billion in automatic tax increases and spending cuts set to take effect next year as one of the impediments to a faster expansion as companies hold back on hiring and investment. The Fed chief repeated his warning a failure to reach an agreement could send the economy “toppling back into recession.”
The central bank is buying $40 billion in housing debt each month and has pledged to keep its benchmark interest rate near zero through mid-2015 as it seeks to spur growth and reduce a 7.9 percent jobless rate. “We’re going to do what we can to support ongoing recovery in growth and jobs and create the demand for output, the demand for firms’ products that will remove that uncertainty about the future sustainability of the recovery,” Bernanke said.
Housing Starts in U.S. Increase to Four-Year High (Bloomberg)
New-home construction unexpectedly climbed to a four-year high in October, more evidence of a revival in the industry that’s helping propel the U.S. economy. Housing starts rose 3.6 percent to a 894,000 annual rate, the fastest since July 2008 and exceeding all estimates in a Bloomberg survey, Commerce Department figures showed today in Washington. The median forecast of 82 economists called for an 840,000 pace. Permits for the construction of single-family homes also advanced to the highest in four years. “The housing industry is in a recovery,” said Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian Enterprises Inc. (HOV) “Those builders that survived the unprecedented downturn of the last six years are in a good position not only to survive but to thrive.”
Record-low mortgage rates and a lower risk that property values will keep falling may continue to attract buyers, giving the economy a lift and benefiting companies such as Hovnanian, New Jersey’s largest builder. The Federal Reserve is buying $40 billion a month in housing debt to keep down borrowing costs, and Chairman Ben S. Bernanke said today the industry will be a “source of economic growth.” Today’s figures indicate that “we’ll have bigger support from housing” for the economy, said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who projected 870,000 starts at an annual rate. “Excess supply has been wound down and there’s a steady increase in demand. That’s good for construction.”
Feldstein Says U.S. Fixing Cliff May Not Avoid Recession (Bloomberg)
Harvard University economics professor Martin Feldstein said the U.S. economy may fall into a recession next year even if Congress and President Barack Obama avert the full brunt of the so-called fiscal cliff. “You are perilously close to the edge of another recession even if we don’t go over the fiscal cliff,” Feldstein said in a Bloomberg Television interview from New York. The end of payroll tax cuts will reduce gross domestic product by about 1 percentage point in 2013, and other tax increases and spending cuts may bring “over 2 percent of GDP tightening,” he said. Feldstein was less optimistic than Federal Reserve Chairman Ben S. Bernanke, who said a fiscal agreement “could help make the new year a very good one.” Feldstein was one of two economists to question the central bank’s leader after his prepared remarks today to the Economic Club of New York.
The fiscal cliff refers to the $607 billion of tax increases and spending cuts that will kick in automatically next year unless Congress acts. The Congressional Budget Office said in an Aug. 22 economic report that fiscal tightening of that magnitude could cause a recession. With the economy growing at less than a 2 percent rate, that may be too small of a cushion to withstand fiscal tightening resulting from a budget agreement, Feldstein said. In response to Feldstein’s questioning about the impact of a budget agreement, Bernanke said “there’s a range of possibilities” for outcomes of the fiscal negotiations, though “some plausible scenarios” would result in “relatively contractionary fiscal policy overall.” The Fed chief said “what I’m particularly concerned about is that we avoid the full force of the cliff.”
Japan’s Fifth-Straight Export Decline Add to Recession Risk (Bloomberg)
Japan’s exports fell for a fifth month, hampered by trade tensions with China and weak demand in Europe, pushing the world’s third-largest economy closer to recession ahead of December elections. Shipments fell 6.5 percent in October from a year earlier, leaving a trade deficit of 549 billion yen ($6.7 billion), the Finance Ministry said in Tokyo today. That compared with the median forecast of 25 economists for a 4.9 percent decline in exports. Imports were down 1.6 percent. Japan will probably slide into recession this quarter on weakness in domestic consumption and falling exports, which account for about 15 percent of the economy. While the yen touched a seven-month low this week on speculation that opposition leader Shinzo Abe will be elected and force more central bank easing, the currency is still more than 30 percent higher than five years ago, hurting exporters’ profits.
“There’s no doubt that Japan’s economy is already in a recession,” said Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo. “Exports will probably continue to take a toll on the economy this quarter.” The yen dropped to 81.84 per dollar as of 9:53 a.m. in Tokyo from 81.67 right before the data was released. The Nikkei 225 Stock Average was 0.9 percent higher, on course for its fifth advance in six trading days.
BOJ in the Balance as Next Government Picks Top Posts: Economy (Bloomberg)
The government taking office after Japan’s Dec. 16 election will pick the central bank’s top three jobs, a chance to reshape policy in the third-largest economy that the opposition aims to seize for unlimited stimulus. BOJ Governor Masaaki Shirakawa, criticized by politicians for his perceived failure to reverse more than a decade of deflation, ends a five-year term on April 8. His deputies Hirohide Yamaguchi and Kiyohiko Nishimura exit in March. Shirakawa pushed back at a press briefing in Tokyo today, saying that he wants “respect for the BOJ’s independence” and that a 3 percent inflation target, advocated by opposition leader Shinzo Abe is “unrealistic.” Unrestrained money- printing would worsen the national debt, he said.
Abe, leading in polls before next month’s vote, helped drive the yen to a seven-month low yesterday by calling for unlimited easing and restrictions on central bank independence. An economy at risk of a second straight contraction this quarter may spur an Abe-led government to install a pro-easing majority at the BOJ, with two former private-sector economists on the nine-member board showing signs of favoring more stimulus. “It looks like we’ll have a clear five majority votes for more BOJ action and that’s a change we haven’t seen in years,” said Kazuhiko Ogata, chief economist at Credit Agricole SA. (ACA) “BOJ policy will become more Bernanke-like in that it will be more aggressive and less focused on side-effects.”
Japan Government to Spend 1 Trillion Yen on Next Stimulus (Bloomberg)
The Japanese government will spend 1 trillion yen ($12.3 billion) on a second round of fiscal stimulus as it tries to revive an economy at risk of sliding into recession. The government will tap reserve funds from this fiscal year’s budget, Chief Cabinet Secretary Osamu Fujimura told reporters in Tokyo today. The latest measures follow the announcement of 750 billion yen of stimulus last month. Economy Minister Seiji Maehara said last week that using reserve funds won’t be enough to support the economy and the government should compile a supplementary budget. The Bank of Japan (8301) refrained today from adding to monetary stimulus, with most analysts in a Bloomberg News survey forecasting more easing in December. The dissolution of the Diet prior to the election on Dec. 16 may restrict the government’s ability to stimulate an economy that risks its third technical recession since 2008.
The economy will contract an annualized 0.4 percent in the September-to-December period according the median forecast in a survey of economists by Bloomberg News after shrinking 3.5 percent in the third quarter. A textbook recession means two straight quarters of contraction. Japanese recessions are officially defined by a government- charged panel that considers data beyond GDP figures.
Weale Says More BOE Stimulus Would Add to Inflation Pressures (Bloomberg)
Bank of England policy maker Martin Weale said the rate of U.K. inflation remains a concern and more stimulus may add to pressure at a time when consumer-price growth exceeds the central bank’s goal. “I think it is more likely than not that inflation will remain above target for much of the next two years,” Weale said in prepared remarks for a speech to be delivered later today in Manchester, England. “My analysis suggests that additional stimulus would, without any corresponding improvement in productivity, add to inflation.” Weale’s comments contrast with those of his colleague David Miles, who said three days ago that there is more the central bank can do if recessionary conditions persist, and indicate continued divisions among the Monetary Policy Committee on stimulus. The BOE will publish the minutes of its Nov. 7-8 meeting at 9:30 a.m., showing how officials voted when they halted expansion of their bond-purchase program.
Separately today, the BOE’s Financial Policy Committee, which is led by Governor Mervyn King, holds its quarterly meeting. After its last meeting in September, the panel maintained its recommendations for banks to raise capital to stave off threats to the financial system. The central bank will publish its next FPC statement, along with the twice-yearly Financial Stability Report, on Nov. 29.
French Downgrade No Bar to Hollande as Investors Weigh Cut (Bloomberg)
French President Francois Hollande’s government will probably be able to keep borrowing at record-low interest rates even after Moody’s Investors Service’s decision to downgrade the nation’s debt. The drop in French bonds today put only a small dent in the 9.4 percent rally since Standard & Poor’s stripped the country of its AAA status in January. The gains are more than double the rest of the global government bond market, according to Bank of America Merrill Lynch indexes, surpassing those of the U.S. and top-rated Germany, the U.K. and Australia.
The gains underscore how downgrades by credit-ratings companies, far from being a signal that prices will fall, may offer investors buying opportunities. The U.S. has been deemed more creditworthy by investors since S&P removed the nation’s AAA grade in 2011, with 10-year note yields dropping to a record this year. For France, Europe’s second-biggest economy, further declines in borrowing costs would provide a spur to Hollande’s socialist government as it struggles with a record trade deficit and an unemployment rate at the highest in 13 years. “When ratings moves are announced there is often something of a headline shock but I don’t think the Moody’s downgrade is telling investors something they don’t already know,” said Mark Dowding, a senior fixed-income manager at BlueBay Asset Management in London, which oversees $47 billion. “I don’t think French bonds are going to be sold off considerably in the short term.”
EU Leaders Face Greek Aid Gap in Brinkmanship With IMF (Bloomberg)
European governments will try to plug an immediate hole in Greece’s finances and prevent new ones from opening in the latest installment of the debt-crisis brinkmanship rattling the euro economy. Finance ministers will battle among themselves and with the International Monetary Fund to find 15 billion euros ($19 billion) through 2014 for Greece and seek an elusive formula for putting its debt on a sustainable path. Today’s crisis meeting in Brussels, the second in eight days, was shadowed by concerns that a two-year fix will leave Greece needing more money and possibly more debt relief to emerge from the spiral of deficits and recession.
“It’s essential now that we take a decision on a set of credible measures to introduce debt sustainability,” European Economic and Monetary Commissioner Olli Rehn told reporters as he entered the meeting. “At the same time, we have to be ready to take further decisions in the light of future developments and of course conditional and dependent of full implementation of reforms of the program by Greece over the coming years.” Officials said the negotiations, which started at 5 p.m. and may run into the night, won’t make a final decision to release the next 44 billion-euro tranche of aid to Greece, partly because parliaments in Germany, the Netherlands and Finland have yet to weigh in.
French Downgrade Widens Gulf With Germany as Talks Loom: Economy (Bloomberg)
France’s loss of the top credit rating at Moody’s Investors Service may weaken President Francois Hollande’s leverage in European budget talks and deepen concern in Germany over its neighbor’s lagging competitiveness. The downgrade late yesterday of Europe’s second-biggest economy underscores the concern expressed by allies of German Chancellor Angela Merkel that the Socialist Hollande’s failure to recognize the urgency of France’s woes risks a deepening of Europe’s slump. “This downgrade will certainly increase pressure on France big-time,” Jan Techau, director of the Carnegie Endowment for International Peace office in Brussels, said today in a phone interview. “It gives Germany more of an edge over France.”
With French bonds rallying since Standard & Poor’s stripped the country of its AAA credit rating in January, the impact of the Moody’s downgrade may be more political than financial. Just last week, German Finance Minister Wolfgang Schaeuble spoke out against his countrymen calling France the “sick man” of Europe. The day before, France’s Liberation newspaper ran a front-page article highlighting German anxiety about Hollande’s policies. “Our most important partner has received a little bit of an admonishing assessment from a rating agency -- but France’s rating is still very stable,” Schaeuble said in speech to parliament in Berlin today. French debt fell today, with 10-year yields rising 5 basis points to 2.12 percent, though that’s still close to the record low of 2.002 percent reached Aug. 3, showing investors don’t share German concerns.
Euro Finance Chiefs Seek Near-Term Greek Fix, Fight on Debt Path (Bloomberg)
European governments are trying to plug an immediate hole in Greece’s finances and prevent new ones from opening in the latest installment of the debt-crisis brinkmanship rattling the euro economy. Finance ministers are battling among themselves and with the International Monetary Fund to find 15 billion euros ($19.2 billion) through 2014 for Greece and seek an elusive formula for putting its debt on a sustainable path. A crisis meeting in Brussels that began at 5 p.m. yesterday is shadowed by concerns that a two-year fix will leave Greece needing more money and possibly more debt relief to emerge from the spiral of deficits and recession.
“It’s essential now that we take a decision on a set of credible measures to introduce debt sustainability,” European Economic and Monetary Commissioner Olli Rehn told reporters as he entered the meeting. “At the same time, we have to be ready to take further decisions in the light of future developments and of course conditional and dependent of full implementation of reforms of the program by Greece over the coming years.” Officials said the negotiations won’t make a final decision to release the next 44 billion-euro tranche of aid to Greece, partly because parliaments in Germany, the Netherlands and Finland have yet to weigh in.
