Greek debt talk progress sparks relief rally as odds favour new deal

By Peter Spence, Economics Correspondent 11 June 2015

Progress between Greece and its creditors has spurred investors in the country's stocks

European Commission president Jean-Claude Juncker (L) said that personal ties with Alexis Tsipras has been "re-established" Photo: REUTERS/Virginia Mayo

Signs that the standoff between Greece and its trio of lenders is finally ending has cheered investors, leading to a tremendous relief rally in shares in the country’s companies.

The Athens Stock Exchange rose by more than 7pc on Thursday morning as negotiators moved closer to a deal.

Leaders said that talks had intensified after coming out of a late-night meeting on Wednesday. Alexis Tsipras, the Greek Prime Minister, said that negotiators had “decided to intensify efforts to resolve the differences that remain”.

“The European leaders realised that we must offer a viable solution and the chance for Greece to return to growth,” he said. Mr Tsipras said that there would be a further meeting with European Commission president Jean-Claude Juncker on Thursday.

Mr Juncker said that “personal ties” between himself and Mr Tsipras have been “re-established”, suggesting that the mood at the debt discussions had improved.

Indications that progress was being made buoyed Greece’s banks. They would be particularly vulnerable if the country were to default on its debt obligations. Shares in Piraeus bank and Euro bank rose by around 19pc and 17pc respectively in early trading.

While there is still “no Greek deal yet, odds still favour one being made”, said Kit Juckes of Societe Generale.

Greece’s trio of lenders have now suggested that a primary surplus - the budget surplus before interest payment - of just 1pc might be acceptable. Greece has offered even stronger austerity targets, of 1.2pc, in the past.

However, Yanis Varoufakis, Greece’s finance minister, said that Greece had not accepted a primary surplus target of 1pc for the current year.

Emily Nicol, of Daiwa Capital Markets, said that the distance between negotiators on the issue of primary surpluses appeared to have “narrowed further, perhaps to just 0.15pc of GDP”.

Yanis Varoufakis, the Greek finance minister (Photo:AFP)

Yet we are “still without any meaningful detail” about how the Greeks might achieve the surpluses they are instructed to deliver, she said.

Jens Weidmann, chief of Germany’s Bundesbank, said: “There is a strong determination to help Greece … but time is running out, and the risk of insolvency is increasing by the day.”

Fears of a default have driven Greeks to pull their cash from the country. High levels of deposit flight have been mitigated by greater funding from the European Central Bank, which reportedly upped its liquidity provisions for the economy on Wednesday.

Speaking in London, Mr Weidmann said that if Greece were to become insolvent, the spill over risks were “certainly better contained than they were in the past, though they should not be underestimated”. He added: “But the main losers in that scenario would be Greece and the Greek people.”

Greek debt talk progress sparks relief rally as odds favour new deal - Telegraph