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Eurozone crisis live: Greek bailout talks due today

It’s Deja EU all over again as Greek PM Lucas Papademos prepares to meet with coalition leaders – talks delayed from yesterday

8.42am: Gary Jenkins of Swordfish Research points out that we are “finally entering the endgame”* of the Greek talks. The ECB’s agreement to cut a deal on its Greek bonds (see 8.33am) means “all the elements are in place” for a deal.

Jenkins writes:

With an election around the corner and protests against the severity and breadth of the cuts required the politicians want to show the electorate their mettle by pushing the deal to the wire, but ultimately it is difficult to see how they can do anything other than agree a deal.

After all, the alternative is a disorderly default which could lead to a much deeper economic depression and potential civil unrest.

* – a chess reference. Would that make Merkel and Sarkozy the queen and king (her the most powerful piece on the board, him trying to avoid being checkmated in the presidential election)? Not sure who the other pieces would be (clearly Fred Goodwin couldn’t be a knight!)

8.33am: An interesting development overnight – the European Central Bank has agreed to take part in the Greek debt restructuring.

Up to a point, anyway. The ECB is still refusing to join private creditors in a 70% haircut on the estimated €40bn of Greek debt on its books. However, it will exchange the Greek government bonds it purchased in the secondary market last year at a price below their face value (details here on the WSJ).

That will reduce Greece’s total liabilites. It also seems only fair, as the ECB would have acquired these bonds for something less than their full face value (as nervous creditors ditched their holdings). Analysts reckon the ECB probably got a 25% discount.

Elisabeth Afseth of Investic pointed out that the ECB will still not take an actual loss:

It seems the exchange would involve the ECB getting EFSF bonds (with a lower face value) in return for its Greek bonds with the EFSF selling the bonds back to Greece at the price it paid the ECB for them.

This could free up around €10bn — valuable, as there are fears that Greece’s second bailout is around €15bn too small, and should be increased to €145bn.

8.22am: New polling data released this morning shows that the Greek people are losing faith in the political leaders.

A survey by Kathimerini/Skai found that 91% of people believe the country is ‘following the wrong track’, with 13% believing that Greece is no longer a functioning democracy [having seen a former European Central Bank vice president installed as their prime minister).

However, 70% of those polled believe it would be a mistake to return to the drachma, suggesting that they still support membership of the eurozone.

The poll also found that Lucas Papademos's approval rating has dropped to 46%, from 55% last November.

Seperate polling from Greece has shown that New Democracy would win the most votes in an election, but probably not enough for an outright majority. Support for Pasok – which was in power until last November – has plummeted.

7.58am: The postponement of last night's talks is being blamed on a problem with delayed paperwork, which didn't give the three coalition leaders enough time to prepare for last night's crunch meeting.

As we blogged yesterday, the draft agreement was due to be translated into Greek -- to allow George Karatzaferis of the Laos party to read it.

A reminder: Antonis Samaras of New Democracy, George Papademos of Pasok and Karatzaferis represent the three major Greek political parties, who form the coalition government run by technocratic PM Lucas Papademos since last November.

They are being asked to sign up to new austerity measures in return for a second Greek bailout, worth €130bn [which was agreed in principle back in October]. Those measures include billions of euros in government spending reductions, and cuts to pensions and wages.

Those measures are deeply unpopular in Greece – as demonstrated by yesterday’s general strike and marches in Athens.

Greek newspaper Ekathimerini is reporting that Papandreou refuses to accept cuts to the basic pension, while New Democracy would not allow the minumum wage to be cut for existing workers (rather than new hires). With elections looking, all sides are focused on political considerations.
http://ekathimerini.com

7.44am: Here’s today’s agenda:

The Greek bailout talks — they are due to start at 10am 11am GMT / noon 1pm local time (but could slip….)
Greek cabinet meets tonight to approve the draft agreement (assuming the three party leaders agree).
French budget balance – 7.45am GMT
Spanish industrial output – 8am GMT
Bank of England begins two-day monetary policy committee meeting

In the bond markets, Germany is aiming to sell €4bn of five-year bobls, and the US is also auctioning 10-year Treasuries tonight.

7.40am: Good morning all, and welcome to another day of rolling coverage of the eurozone crisis.

Later today, Greek PM Lucas Papademos will hold talks with the leaders of Greece’s three political parties over the country’s second bailout. That sounds terribly familiar, doesn’t it? These are the talks that were scheduled to take place last night – but were once again postponed until today.

Deja vu? Deja EU, more like.

On the economic front, we have trade data from Germany to digest, along with France’s latest budget balance and industrial output from Spain.

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