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Eurozone crisis live: Greece faces deadline over second bailout

The Greek government must tell the European Union later today whether it accepts the terms of the €130bn rescue package, as talks with its creditors falter

8.43am: Helena Smith, in Athens, confirms the prospect of April elections is looming large over intense negotiations among coalition parties over Greek austerity proposals. Their deliberations will be followed by a brief meeting with prime minister Lucas Papademos. He, in turn, will deliver Greece’s position to the “troika” of visiting debt auditors from the EU, ECB and IMF. It’s likely, however, that word will leak out before then. Even if further cost-cutting measures ares accepted, says Helena, it it is far from sure that recalcitrant MPS will also endorse them.

Emerging from the talks last night, Giorgos Karatzaferis, the media-savvy leader of the populist Laos, one of the three parties backing Papademos’ national unity government, railed: “I’m not going to contribute to the explosion of a revolution [by supporting] a wretchedness that will then spread across Europe.”
Antonis Samaras, who heads the main conservative New Democracy party, also emphasised that the boxing gloves were on. “They are asking for more recession that the country can take,” he said in a statement referring to creditors’ demands that Greece accept further wage and pension cuts. “I am fighting against them. This is the first time there has been real negotiations.”
Papademos in a statement said progress of a kind had been made. The three party leaders had agreed to further spending cuts amounting to €1.5 bn.
“These leaders were not given a mandate to allow the country to go bankrupt,” Babis Papadimitriou, a prominent commentator on economic affairs, told Skai news. “Bankruptcy will mean years of isolation. If they allow this to happen they will have betrayed Greeks.”

8.30am: The FT has a story this morning suggesting as many as half of the capital-boosting proposals put forward by 30 European banks may be rejected as not sufficiently credible. Remember these banks were forced to come up with plans to increase their capital cushions after the European Banking Authority in December found that together they needed to raise €115bn to meet their regulatory targets.

The EBA board are due to discussed submitted plans at a meeting next week. Some experts have a pointed finger at Commerzbank as one bank likely to find filling its capital shortfall a big ask. Since then the German bank has generated €3bn of capital toward its €5.3bn stress test shortfall and local regulators have played down concerns.

Spanish bank Santander was found to have the largest shortfall – of €15bn – but has insisted it has found ways of filling the gap. Only Italy’s Unicredit opted for a rights issue to raise capital – and look how well that went.

8.16am: There’s not much in the diary today. Here’s the agenda:

10am deadline for Greek politicians to reach agreement on austerity measures
11am German factory orders for December (Consensus forecast: 1% rise)
2pm Klaas Knot, governing council member of the ECB speaking at an event in Amsterdam

8.05am: As time ticks on there is increasing concern that a lack of agreement among Greek politicians will overshadow the day. The Asian markets were up overnight on the back of Friday’s strong jobs figures from the US. (Japan’s Nikkei average rose 1.1% to a three-month high of 8,925 points, the Hang Seng was up 0.51% at 20,862.) Back in Europen the mood is more somber.

Greek coalition parties are supposed to be working to a deadline of midday – 10am GMT. That might get pushed back, of course, but if it passes without agreement it will do nothing to calm the mood.

Here is the view from analysts at Investec:

Greek politicians face a general election soon after the second bailout has been agreed (or not as it may be). The prospect of an election campaign is certain to influence bailout negotiations. The extra austerity measures may well be counterproductive, but a messy default and uncertainty over Greece’s position in the Euro will not do much good either, so it is a bit of a lose-lose situation for Greek politicians. Public opinion seems to put greater trust in outsiders than in domestic politicians though, so putting up with EU/IMF conditions may still have the upper hand with the electorate, but remains to be seen if politicians can agree. With no agreement later today, expect markets to become increasingly concerned and a lack of
flexibility from the EU may cause some contagion…

7.45am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.

Today is deadline day for Greece, which must tell the European Union whether it accepts the terms of its second bailout, worth €130bn. The heads of its three largest political parties spent the weekend locked in talks, but are still divided.

One leader – Laos’s Giorgos Karatzaferis – has already refused to endorse the painful package of spending cuts and tax rises. Can PM Lucas Papademos pull a deal out of the fire?

Athens is also still struggling to reach a deal with its private creditors over its debt restructuring package – adding to fears that Greece might fall into bankruptcy.

On the economic front, the latest German factory order data should be released this morning, showing how its manufacturers fared at the end of 2011.

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