Talking of deadlock, there's not much sign of that white smoke so it could be time to wrap up the blog.
Here's a quick round-up of today's main developments:
• The final (we hope) debt talks have finally started in Athens between the party leaders
• A meeting of eurozone finance ministers has been called for tomorrow at 5pm GMT in Brussels to discuss Greece
• The US is at risk of another downgrade, S&P says
• European stock markets (and the Dow so far) were broadly down ahead of details of the Greece deal
Political deadlock was S&P's main concern back in August when it removed the US's AAA rating, and those fears haven't gone away. If anything a solution to America's enormous debt issue has become even more out of reach with nothing likely to be done until after the November elections. As John Chambers points out in the Bloomberg report:
Political brinkmanship hasn't gone away. That simply doesn't happen in other AAA economies.
They're certainly having a busy afternoon at S&P. Not content with hurling a spanner in the works of the already Gordianesque Greek debt talks, they're now saying the US is at risk of another downgrade unless it gets its fiscal ducks in a row.
According to Bloomberg, John Chambers, S&P's managing director of sovereign ratings, told a webcast for clients this afternoon that it needed a "credible" fiscal plan. Bloomberg reports:
The U.S., lacking a plan to contain $1 trillion deficits, faces the prospect of another rating cut in six to 24 months depending on the outcome of November elections, according to John Chambers of Standard & Poor's.
America has had an AA+ rating with a negative outlook since August 5 when S&P stripped the nation of its AAA ranking for the first time, citing the government's failure to agree on a path to reduce deficits. The U.S. has a one-in-three chance of another downgrade, Chambers said.
"What the U.S. needs is not so much a short-term fiscal tightening, but it has to have a credible medium-term fiscal plan," said Chambers. "That is going to have to say something about entitlements, and that is probably going to have to say something about revenues."
Jean-Claude Juncker, the president of the eurogroup of eurozone finance ministers, has called a meeting for tomorrow at 6pm in Brussels to discuss the Greece deal, assuming there is one to talk about.
With the sense of timing that we have come to know and love during this crisis (remember this classic from last year), S&P have opined that even with a 70% haircut, Greece's debts are not sustainable unless the ECB also takes a hit.
This si likely to go down like a sick sandwich in Athens, Brussels and quite a few other places in between, coming as it does at the point where we might actually be getting close to a deal on Greek debt.
S&P analyst Frank Gill told clients in a webcast that
In our original estimate, which was made two years ago, at that time debt-to-GDP would have been restored to a far more sustainable level.
But because only a small subcomponent of investors are actually taking the haircut and the official sector is not, or only partially, then the reduction... is probably not sufficient debt relief to make debt sustainable given the outlook for GDP itself.
The equity markets have turned a touch sour this afternoon retreating from six month highs as the Greek talks became ever more delayed.
The FTSE closed 0.24% down at 5875.93, losing 14.33 points, while Germany's DAX lost 0.15% to close 10 points down at 6744.19. They were following the Dow Jones which spent the morning in negative territory, down 0.38% at 12829. France's CAC bucked the trend, recording a small rise to close 0.07% up at 3413.77.
Helena Smith, our woman in Athens, is following the tortuous developments in Hellas and offers some insight into what we can expect tonight.
So the talks have finally begun, but the big question is will they ever end? The Greek prime minister Lucas Papademos would like this final meeting to be over in not more than three hours. That way he can convene a meeting of his cabinet later tonight with the express purpose of having the deal endorsed.
The former vice president of the ECB is reputedly very unhappy with the way Greece's political leaders have comported themselves in recent days - fearing that in addition to putting the entire loan agreement at risk of being scrapped, they have after three days of delay also turned the country into a laughing stock in Europe.As German Chancellor Angela Merkel's spokesman Steffen Seibert made clear today patience in Europe is running out: "It is important that the negotiations now come to an end," said Steffen Seibert.
But as exhausive as the negotiations have already been, the leaders do not seem willng to sign off on the cost cutting reforms without a fight - prompting one official to say:"I fear it is going to be another long night."
Tellingly Georgios Karatzaferis, who leads the small populist Laos party in the ruling coaliton, felt fit to tell state-run TV that "austerity measures are like shoes that are too tight. Sooner or later, you want to kick them off."
Helena also reports that there is more fighting talk from Greece's powerful communist party, which calls for Greece to leave the EU and default. Reacting to the new loan agreement this afternoon it said:
The working class and low income must now, with one voice and one fist, shake Greece. The loan agreement must not be voted. People should react through rebellion, organisation, popular alliance and rallying around the KKE (Greek communist party).[Greece] should detach itself from the EU through the power of the people … and by permanently writing-off [its] debt.
Afternoon. While we're waiting for the proverbial puff of white smoke to come out of the Greek government offices in Athens, an amusing tweet from Shaun Richards, the independent economist:
#Greece's one-year govt bond yield has dipped to a mere 497%! Make of that what you will as its lower but can 497% be good? #gfc2 #euro
Remarkable news from Greece -- the meeting between the Greek prime minister and the leaders of the country's three biggest parties is about to begin.
George Papandreou, Antonis Samaras and George Karatzaferis have just arrived at Lucas Papademos's office.
Just 53 hours later than Monday's deadline to give the EU an answer, but who's counting, eh?
Now the waiting begins – will the quartet swiftly endorse the draft agreement for the €130bn bailout, or is there more drama ahead?
Either way....I'm handing this blog over to my colleague Martin Farrer. Thanks for your time and comments, and apologies for the technical problems above the line (I don't think they're my fault, but you never know. GW)
There's a sense of torpor in the financial markets now, as investors wait for some action in Athens.
It's such a change from last autumn, when the latest developments in the euro crisis would send stocks racing up, or down. Right now, the FTSE 100 is up 1 measly point, while the Dow Jones has opened 9 points higher.
The euro remains solidly higher today at $1.326, but David Song of DailyFX warns that the single currency is vulnerable:
German lawmakers are to vote next week on the proposed bailout package, and if the vote fails, the European Central Bank would be blocked from exchanging its holdings of Greek debt for European Financial Stability Facility bonds.In the event of such an occurrence, we would expect significant downside pressure on the Euro, as it would all but guarantee a disorderly Greek default.
Meanwhile, the spoof Angela Merkel twitter account continues to be a source of strength, with a helpful translation for Georgios Karatzaferis (who has asked for the draft agreement in Greek, not English)
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