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Eurozone crisis live: reaction to latest Greek downgrade

S&P says Greece is in “selective default” hours after Germany approves Greek bailout 2.0

8.44am: This from the European Central Bank this morning. Presumably this is all to do with the private sector involvement part of the bailout 2.0 agreement…

28 February 2012 – Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

The Governing Council of the European Central Bank (ECB) has decided to temporarily suspend the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic for use as collateral in Eurosystem monetary policy operations. This decision takes into account the rating of the Hellenic Republic as a result of the launch of the private sector involvement offer.

At the same time, the Governing Council decided that the liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central banks, in line with relevant Eurosystem arrangements (emergency liquidity assistance).

Marketable debt instruments issued or fully guaranteed by the Hellenic Republic will become in principle eligible upon activation of the collateral enhancement scheme agreed by the Heads of State or Government of the euro area on 21 July 2011, and confirmed on 26 October 2011, together with a number of other measures aimed at assisting Greece in its adjustment programme. This is expected to take place by mid-March 2012.

8.37am: It’s pay day for Ireland, as the International Monetary Fund has approved a .33bn loan to the Celtic-tiger-turned-tigger – the latest instalment in a three-year .23bn programme to support the country through a period of tough financial reforms.

Ireland seems to have behaved itself well enough to receive its pocket money, according to IMF first deputy managing director David Lipton. He says:

The Irish authorities have continued strong implementation of their programme despite deteriorating external conditions.

At the same time, the challenges Ireland faces have intensified since the outset of the programme, with growth expected to ease to about 0.5% in 2012 owing to a slowing in trading partner activity.

The Irish authorities have responded by raising the fiscal consolidation effort adopted in Budget 2012, and the budget remains on track to meet an unchanged general government deficit target of 8.6% of GDP. If growth should weaken further, the automatic stabilisers should be allowed to operate to help avoid jeopardizing the fragile recovery

The IMF programme was approved in December 2010 as part of a larger 4bn financing package supported by the European Financial Stabilisation Mechanism, the European Financial Stability Facility, loans from the UK, Sweden and Denmark and Ireland’s own contributions.

8.17am: Upbeat news from Germany – which is always assured to raise the spirits of everybody else in Europe.

German consumer confidence has increased again, its sixth rise on the bounce. The country’s GfK index has increased to 6.0, its highest level since March 2011, as households said they felt significantly more positive about the prospect for their incomes.

ING’s Carsten Brzeski reckons:

Looking at the available components shows that income expectations have increased significantly, while the German willingness to buy dropped somewhat. Today’s increase bodes well for a further stabilisation of private consumption throughout 2012.

Although it is often said that the way to the German heart is through his car, the latest increase of fuel prices, approaching last year’s record highs, has not undermined consumer confidence. Greek crisis, high fuel prices; it looks as if nothing can shatter German confidence. At least for the time being, the Eurozone biggest economy looks like a country full of optimists.

7.47am: Here’s Michael Hewson, senior market analyst at CMC Markets UK, reacting to yesterday’s events.

On S&P grading Greece “SD” (see below):

The market’s reaction was one of complete indifference, such is the reality of life in this latest, but not unexpected twist in what has become the almost everyday routine of the European debt crisis.

And on the vote passing the Greek bailout in the German parliament:

Even though this bailout made it through the German parliament it is becoming very apparent that the German public is losing faith in the current bailout policy, and politicians worried about re-election could well start to reflect this mood. As such the scope for further bailout cash could well be much more difficult to attain as public opinion swings against further taxpayer cash for other European countries.

7.42am: Morning all.

It seems highly unlikely that you weren’t all tuned in until past 9pm yesterday, but those who had something better to do may have missed Standard & Poor’s issuing perhaps the only credit rating you’d never heard of.

Greece is now classed “selective default”, or SD, which is one for the Panini sticker album. The move followed the Greek government’s decision to add “collective action clauses” to its bonds, which give Athens the authority to force bondholders to take part in its debt restructuring, if they declined to take a voluntary haircut on their loans.

Standard and Poor’s also put the rating of the EFSF bailout fund on a negative outlook, in line with its ratings on France and Austria.

The ratings tinkering came after a day in which the German parliament nodded through Greece bailout 2.0 – voting the plan through by 496 votes to 90, with five abstentions.

After the German vote, it is time of the Finns to debate the package today and then vote on it tomorrow.

And also today:

• The latest German inflation numbers with CPI for February expected to slip back slightly from 2.3% to 2.2%, while German Gfk consumer confidence for March is expected to pick up slightly from 5.9 to 6.

• The Irish Attorney General could introduce another curve ball into the whole save the eurozone process, with a decision expected today on whether an Irish referendum is required on the new EU fiscal compact.

Portugal is also due to publish its latest financial health check from the troika who have been assessing the country’s progress under its €78bn bailout plan.

• Meanwhile, Italy is also set to sell €6.25bn of five and 10 year new bonds with yields expected to fall again – this time below 6% – depressed by the ECB’s LTRO programme. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds