Stocks rise, euro slips on Greek debt progress (AFP)

LONDON (AFP) – Global stock markets were firmer Friday but the euro fell against the dollar on profit-taking as investors voiced relief over a major eurozone debt deal aimed at saving Greece and preventing contagion.

European markets closed with modest gains, coming off early highs as they digested a second Greek rescue, judging it to be a step in the right direction even if failing to dramatically improve the country's debt position.

Dealers said the accord, however, was at least good enough to buy some considerable time to manage the debt problem, leaving open the question of whether the eurozone can eventually resolve the crisis for good.

"The latest breakthrough on a second bailout for Greece is enough to keep the markets happy for the next few months," said Kathleen Brooks, research director at trading group Forex.com.

"It's holiday season, people are dreaming of sandy beaches, so we think the markets will accept this plan as more of a plaster cast than a band-aid that will go some way at least to sorting out Greece's problems."

Attention turned in the afternoon to Washington where President Barack Obama and his Republican opponents appeared to be making no headway in talks on the deficit, with an agreement needed by August 2 to avoid a potentially devastating US default.

In London, the benchmark FTSE 100 index of top shares closed up 0.60 percent at 5,935.02 points. In Frankfurt, the DAX added 0.50 percent to 7,326.39 points and in Paris the CAC 40 rose 0.68 percent to 3,842.70 points.

Other European markets posted similar gains.

The euro was weaker at $1.4369 in late London trade, down from $1.4425 in New York late Thursday when it hit a two-week high of $1.4439 in the wake of Thursday's Greek debt deal. The dollar was little changed at 78.40 yen after 78.43 yen.

The eurozone agreed at an emergency summit to put up 159 billion euros ($229 billion) for Greece with private creditor help and deployed a safety net for future crises.

"There were three issues to deal with ... that investors were keeping an eye on," said Joshua Raymond, chief market strategist at City Index traders.

"The details of the second Greek bailout, steps taken to prevent debt contagion and the amount of expected liabilities for private lenders, ie banks. On all three of the fronts the market is giving the plans the thumbs up but in the long term I think we remain some way off from a high-five."

In New York, stocks were mixed, waiting on news from Washington as General Electric and McDonald's reported second-quarter profits beating expectations while industrial giant Caterpillar fell short.

The blue-chip Dow Jones Industrial Average was down 0.34 percent at around 1600 GMT while the tech-heavy Nasdaq Composite added 0.36 percent.

The US market jumped 1.21 percent on Thursday as news of the Greek deal came through so there was little new on that front to go on, leaving investors to worry about debt problems closer to home.

"The market is now left hanging on the edge ... as it awaits direction from the debt ceiling negotiations in Washington," said Patrick O'Hare, an analyst with Briefing.com.

"Good earnings has enabled the market to keep a firm grip on things yet it is cognizant that the risk of losing grip builds as each day passes without a credible compromise," he added.

In Asian trade earlier Friday, Tokyo rose 1.22 percent, Sydney climbed 1.03 percent and Hong Kong jumped 2.08 percent while Shanghai added 0.18 percent.

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Moody's warns Greek default almost certain (Reuters)

SYDNEY/ATHENS (Reuters) – Ratings agency Moody's cut Greece's sovereign debt by three notches on Monday to Ca, just one notch above default, saying the new bailout set a negative precedent for creditors of other debt-burdened countries.

Euro zone leaders agreed last week to offer Greece debt relief through a new rescue package of easier loan terms, with private creditors shouldering part of the burden via a debt exchange.

The downgrade means Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it would offer a new rating after the debt swap was completed.

"Once the distressed exchange has been completed, Moody's will reassess Greece's rating to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings," it said.

Last Friday, Fitch Ratings said Greece would be declared in restricted default due to the steps taken in the new euro zone rescue package but that new ratings of a low speculative grade would likely be assigned once the bond exchange is completed.

Moody's said the combination of the announced EU support program and debt exchange proposals by major financial institutions implied that private creditors would incur hefty losses on their Greek government debt holdings.

It said that while the overall package carried a number of benefits for Greece, including lower debt-servicing costs and reduced reliance on financial markets for years to come, the impact on its debt burden would be limited.

The rating agency also warned that despite some debt reduction thanks to the new rescue package, the country still faced medium-term solvency challenges and significant implementation risks.

"The announced EU program along with the Institute of International Finance's statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," Moody's said.

The IIF said that the bond-exchange deal would help reduce Greece's debt pile by 13.5 billion euros, and by offering a menu of new instruments it aims to attract 90 percent investor participation in the plan.

But Moody's noted that Greece would still have a mountain of debt to service after that.

"(Greece's) stock of debt will still be well in excess of 100 percent of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," it said.

Moody's added that while the rescue package for Greece benefited all euro zone countries by containing near-term contagion risks, the deal set a negative precedent.

"The support package sets a precedent for future restructurings should the finances of another euro area sovereign become as problematic as those of Greece. The impact of Thursday's announcement for creditors of Ireland and Portugal is therefore likely to be credit-neutral," it said.

Standard & Poor's and Fitch have downgraded Greece to CCC.

Derivatives body ISDA told Reuters on Friday that the IIF's plans for voluntary debt swaps and buybacks to help rescue Greece wouldn't trigger a "credit event" and payment of CDS contracts, limiting the fallout of any default rating.

One condition for a credit event affecting CDS is that changes in the terms of debt must be binding on all holders, which ISDA said was not the case.

(Editing by Hugh Lawson)

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ECB's Trichet confident Greek crisis a one-off (Reuters)

BERLIN (Reuters) – Greece's sovereign debt crisis will prove unique in the euro zone and will not spread to other countries, European Central Bank President Jean-Claude Trichet said in a newspaper interview on Friday.

Speaking the day after euro zone leaders agreed a second bailout package for the heavily indebted Mediterranean country, Trichet insisted that other countries like Italy would take appropriate measures to ensure market confidence in their debt.

"I have confidence that all countries in the euro area will not only rigorously keep their present commitments, but will be 'ahead of the curve' and take appropriate measures, as is the case for Italy," he told Germany's Sueddeutsche Zeitung.

Asked if euro zone countries were throwing good money after bad by propping up Greece's public finances, Trichet said that "scrupulous" implementation of structural reform in Greece, alongside international technical assistance, was essential.

He also repeated calls he made earlier this month for a euro zone finance ministry with powers to impose structural reform on recalcitrant national governments.

"Tomorrow it should be possible to impose measures on a country that does not implement the agreed adjustments," he said. "And as for the day after tomorrow ... I think that the Europeans will invent a new type of confederation which ... would have, naturally, a European finance ministry with its own responsibilities."

Earlier on Friday, Bundesbank President Jens Weidmann said that the Greek bailout had already weakened incentives for euro zone countries to maintain solid finances and led toward a fiscal transfer union.

Trichet did not go this far, and denied that there was any crisis of confidence in the euro as a currency, pointing to the ECB's anti-inflation track record.

"The euro is a solid, strong and credible currency. We do not have a currency crisis because the euro is stable and keeps its value extremely well," he said.

(Additional reporting by Brian Rohan; editing by Ron Askew)

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Merkel Parliament confidence vote from the Greek deal

BERLIN (AP)--Chancellor Angela Merkel, said Friday it is confident of obtaining the German legislators support for Greek bailout new agreement, stressing that Europe leaves no Member State behind.Merkel herself portrayed as a patient but European enthusiast, after obtaining the agreement - which has been generally welcomed in Germany after the month in which she did face criticism and abroad for his leadership tarnished.While Thursday Summit "significant results", warned against expectations it would put an end to the crisis of debt once and for all Merkel has - and said a more radical solution, as a forced debt restructuring would have uncontrollable consequences. "" In words, desire a spectacular Thunder is understandable - but politically, it is evidence of negligence and just a sign that it is losing patience, "said the Chancellor.Angela Merkel has pushed through a contribution from banks, the key - but goals conceded and wider powers for the Fund of rescue of the euro area, such as the authorization to buy bonds in the secondary market, between legislators in his coalition of center-right.Specified made Chancellor is not plan precipitate the Greek bailout of new and change in the Fund of relief through the German Parliament, which is not scheduled to meet at the September 6. She said that it was "absolutely sufficient" to her vote after the summer break. "I am absolutely certain that I can count, of course, the majority of the coalition"in obtaining the adopted legislation, it was added at a press conference." While the opposition at least one party reported that it would vote in favour, failing to deliver votes from the his own coalition would be a blow to Merkel.Merkel faced the pressure within his own coalition in the last few months to maintain its ruthless approach in euro-zone debt crisis. As internal political tensions persisted in issues, including possible tax cuts, and the output of the Germany of nuclear energy, speculation grew that more legislators might in the future rebel votes on euro rescue packages.Government lawmakers and the opposition parties gave the Summit deal a positive response in large part. Economy Minister Philipp Roesler, leader of the junior coalition under Merkel partners the free Democrats, said Friday that "Europe has shown in a situation difficult is how high."The mass-circulation Bild daily, which has been critical to bail out of Greece and others, said that leaders of the EU "finally are trying more to win time with offers of only Government loan - and naively hoped everything will be fine shortly." "More expensive that the new route could be, and some compromises are unpleasant, the bottom line is: good,"Bild wrote in the editorial on Friday.""The left Tageszeitung daily paid Merkel a compliment of sorts, with a first page title stating that "Merkel puts its stamp on the euro" on a picture of a piece of a euro bearing the portrait of the Chancellor.Angela Merkel stressed that help the Greece of his situation is a responsibility of Europe and that the euro is "part of the economic success of the Germany." "We know that the problem of one is also the problem of all," she said. "Europe is more conceivable without the euro, and it is worth every effort."But the burden of proof, it pointed out, is on the Greece to carry out its unpopular program of spending cuts, structural reforms and privatizations. "The very, very most important, it is now that the Greece grows its program," she says,. ___juergen Baetz and David in Berlin contributed to this report. "

Fitch: Greek Deal to put the country in default

Brussels (AP) - Greece will be governed by default on its debt of a new plan of the euro area investors to take losses on the obligations of the country, credit rating agency Fitch said Friday.However, the move is unlikely to trigger payment of bond insurance - facilitating a major concern for the Greek and European leaders seeking to contain the crisis of the debt of the continent.The new rescue plan includes asking bondholders to accept new debt with lower interest rates and a refund in 30 years to help reduce the burden of the debt of the country and give him the time to reform its economy. The decline in the rate over time will result in loss of investment for the holders of bonds.When the debtor pursuant to a loan to a disadvantage creditors, it is considered as in default and European leaders knew that their plan would probably force the demotion.But remain in default the Greece - is expected to occur in the fall - will probably be brief. Fitch Ratings said Friday that he can pass it to junk level as soon as it issues new bonds of replacement. That could take only days, if not hours.Lack of government debt is relatively common among the poorest countries, but this instance would be a first for a member of the euro area rich and a blow to the prestige of the common currency. The Greece will join countries such as the Ecuador, Uruguay and the Ukraine, who have defaulted in recent years. Still, many economists have been saying for months that it is inevitable since the debt burden of the Greece is too large to pay and a way must be reduced.Anxiety of moderation on the immediate effect of the default value, an organization of trade financial derivatives, said that the new contract of rescue for the Greece should not lead to payments of credit default swap.Jump in insurance payments can be potentially massive and would have threatened the banking sectors, in Greece and in Europe. "A proposal for a voluntary debt Exchange... because it is expressly voluntary, it should not trigger CDS,"David Geen, General Counsel to the New York International Swaps and Derivatives Association based, wrote in an email from London.Fitch said that the holders of bonds involved in the Greece would lose about 20% of the value of their investments under the agreement reached Thursday night", a vast plan 109 billion euros ($156 billion) which gives the Greece of new loans, supports Greek banks and reductions in the rate of interest on credits of rescue.It also funds of rescue of the euro area to act quickly to help countries in trouble to try to prevent the crisis multiply since already made to the Greece of Portugal and Ireland to the large countries such as Spain and Italy.The Agency said that, as soon as the period of the offer for the new, more long term bonds closes, Greece will get a "default" rating limited Once the new debt is actually issued, Greece would probably get a new dimension in the area of low grade speculative. New bonds would be guaranteed by the Governments of the euro area.European officials have resisted the idea of leaving the default value of the Greece on its debts for most of the debt crisis of 21 months which begins when a new Government has revealed the extent of the financial problems of the country. But a rescue of 110 billion euros ($156 billion) in the form of loans in the euro area and the Monetary Fund International last year did not put the country back on its feet.The new deal to reduce the size of the debts of the Greece, which many economists say are too big to be paid any additional credit the country gets. Greece to some EUR 340 billion at the end of last year, or 143% of economic output. This figure should reach 160% as the struggles of country to close its trade deficit during a deep recession.___Derek Gatopoulos in Athens contributed to this report.