Euro zone summit aims to keep Greece in single currency

BRUSSELS - Euro zone leaders will fight to the finish to keep near-bankrupt Greece in the single currency on Sunday after the European Union's chairman canceled a planned summit of all 28 EU leaders that would have been needed in case of a "Grexit".

But leftist Prime Minister Alexis Tsipras will be required to enact key legislation in parliament from Monday to start restoring the broken trust of his partners in the 19-nation currency union before they will agree to open negotiations on a third bailout, ministers said.

European Council President Donald Tusk announced that he had called off the tentatively planned meeting of EU heads of state and government, saying the euro zone summit to start at 4 p.m. (1400 GMT) would "last until we conclude talks on Greece".

Eurogroup finance ministers resumed a meeting suspended after nine hours of acrimonious debate on Greece's application for another three-year loan on the basis of reform proposals Tsipras accepted after long resisting.

A draft statement seen by Reuters said Greece must pass laws to change its value added tax and pension systems, reform bankruptcy rules and strengthen the independence of its statistics office before bailout talks can even start.

"The Eurogroup... came to the conclusion that there is not yet the basis to start the negotiations on a new program," the draft said.

"Only subsequent to legal implementation of the above mentioned measures can negotiations on the memorandum of understanding commence, subject to national procedures having been completed," it said, in a reference to authorization by national parliaments in countries such as Germany.

The draft said Greece needed 7 billion euros by July 20, when it must make a crucial bond redemption to the European Central Bank, and a total of 12 billion euros by mid-August when another ECB payment falls due.

It did not say how those needs would be met. A source said the statement would be handed over to the euro zone leaders and might not be issued before they meet.

Several hardline countries voiced support for a German government paper that recommended Greece take a five-year "time-out" from the euro zone unless it accepted and implemented swiftly much tougher conditions, notably by locking state assets to be privatized in an independent trust to pay down debt.

Argument became so heated that Eurogroup chairman Jeroen Dijsselbloem decided to adjourn at midnight and resume talks at 11 a.m. to allow tempers to cool.

"The main obstacle to moving forward is a lack of trust," Italian Economy Minister Pier Carlo Padoan told reporters.

The ministers agreed in principle to seek ways to ease Greece's debt burden by extending loan maturities and other steps stopping short of a "haircut" or writedown, provided Athens first implements reforms.

Greeks see humiliation
European Commission Vice-President Valdis Dombrovskis, who is in charge of the euro in the EU executive, doused Greek hopes of an immediate agreement on Sunday to start loan negotiations.

"It's utterly unlikely the European Commission will get a mandate to start formal negotiations as regards a third program or ESM program today," he said, referring to the European Stability Mechanism bailout fund.

Greece's new finance minister, Euclid Tsakalotos, was silent in public but the reaction among some lawmakers in Tsipras' radical leftist Syriza party, still smarting from having to swallow austerity measures they had opposed, was furious.

"What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the Tsipras government," Dimitrios Papadimoulis, a Syriza member of the European Parliament, told Mega TV.

With banks shuttered for two weeks, cash withdrawals rationed and the economy on the edge of an abyss, some Greeks in the streets of Athens vented their anger on German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble.

"The only thing that I care about is not being humiliated by Schaeuble and the rest of theme" said Panagiotis Trikokglou, a 44-year-old private sector worker.

Greece has already had two bailouts worth 240 billion euros from euro zone countries and the International Monetary Fund, but its economy has shrunk by a quarter since the crisis began, unemployment has soared above 25 percent and one in two young people is out of work.

Athens defaulted on an IMF loan repayment last month and faces state bankruptcy if it cannot make the bond redemption on July 20, which would likely force the ECB to cut emergency funding for Greek banks.

German sources said Schaeuble, Merkel and Social Democratic Vice Chancellor Sigmar Gabriel had agreed on a division of labor to force Greece to accept tougher conditions or leave the currency area temporarily.

However economists said the idea of a temporary exit was likely to mean ejecting Athens from the European monetary union in the end.

Paul De Grauwe, a Belgian economist at the London School of Economics, compared it to a couple having a trial separation.

"Temporary Grexit is like temporary divorce. Most if not all end up being permanent," he said in a Twitter message.

Holger Schmieding, chief economist of Berenberg Bank, was even more categorical, saying: "Temporary Grexit is Grexit."

Analyst Nicolaus Heinen of Deutsche Bank told Reuters that billions of euros withdrawn by Greeks before capital controls were imposed would crowd out any new currency in a cash economy similar to Cuba or Lebanon, where the dollar is king.

There would be political conflict over a date for Athens' return to the euro zone, and "tension between Greece and the rest of Europe would be bound to grow if Greece was sent to stand outside the classroom like a naughty schoolboy," Heinen said.

Merkel is under mounting pressure from her own conservatives not to give any more money to Greece, but she has so far said she wants to hold the euro zone together, and that will require a third program for Athens.

She requires the assent of the German parliament to agree to the opening of loan negotiations, so diplomats expect her to commit to calling a special session of the Bundstag to give her that mandate if Greece enacts prior reforms this week

The United States has added its voice to calls for a deal this weekend, concerned at the geopolitical consequences if Greece were to be cut loose and become a failed state in the fragile southern Balkans, adjoining the Middle East.

"No one wants to see a North Korea in southeastern Europe," a European Commission official said. — Reuters

Trade deficit widens; weakness abroad fuels export drop

WASHINGTON  - The U.S. trade deficit widened in May, fueled by a drop in exports that could heighten concerns over weak overseas demand and a strong U.S. dollar.

The Commerce Department reported on Tuesday that the trade gap grew $1.2 billion to $41.9 billion. That was less than the $42.6 billion deficit expected by analysts and suggests Wall Street economists may slightly raise their forecasts for economic growth in the second quarter.

But the drop in exports in May highlights a change in the tenor of economic growth since the United States exited the 2007-2009 recession. The economy relied more on export-led industries such as manufacturing early in the recovery, but growth is increasingly coming from domestic drivers like construction and services as the economic cycle matures.

Exports fell $1.5 billion, or 0.8 percent, to $188.6 billion in May, led by a drop in overseas sales of U.S.-made capital goods. Imports fell by about $300 million, or 0.1 percent, to $230.5 billion.

Prices for U.S. Treasuries rose after the data, while U.S. stock index futures were unchanged. The dollar gained against a basket of currencies.

Since the middle of last year when the Federal Reserve made clear it was planning to raise interest rates to keep the economy from eventually overheating, the dollar has strengthened, making U.S. exports less competitive.

Since that time, Europe's economy also has been on shaky ground and the European Central Bank has eased monetary policy, causing the euro to weaken against the dollar. European policymakers are currently fighting a debt crisis in Greece that threatens to rip apart the continent's monetary union.

Exports of goods to Germany fell 6.0 percent in May from the prior month, according to non-seasonally adjusted figures. Sales fell 4.2 percent to France, 2.1 percent to Mexico and 3.0 percent to Japan.

The U.S. economy contracted at a 0.2 percent annual rate in the first quarter, hit by bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports.

Other economic data, including figures on hiring and consumer spending, have pointed to a rebound during the second quarter, and a firming domestic economy could encourage the Fed to raise rates later this year.

In May, the drop in imports came as purchases from China rose 9.5 percent. That could fan further criticism from U.S. manufacturers that Chinese firms are using a cheap currency and unfair subsidies to gain market share in America.

At the same time, U.S. net imports of oil fell to $5.8 billion in May, the lowest level since 2002.  — Reuters

Europe rejects Greek bailout extension after referendum shock

BRUSSELS, Belgium - Greece hurtled towards default and a possible euro exit Saturday after Europe responded to the leftist government's announcement of a surprise referendum by refusing to extend Athens's desperately needed bailout.

The most dramatic day in the five-month crisis saw long lines of people queuing at cash machines in Greece after the announcement by radical Prime Minister Alexis Tsipras, amid fears of a bank run and possible capital controls.

In Brussels, Greek Finance Minister Yanis Varoufakis had asked eurozone colleagues to stretch the aid plan for a few days past its June 30 expiry date and until after the July 5 referendum vote on a creditor reform plan, but they unanimously rejected his appeal.

The move leaves debt-laden Athens struggling to meet a crucial 1.5 billion euro IMF debt payment on Tuesday, putting Greece's place in the single currency at risk and threatening the entire post-war European project.

"The Greek government has broken off the process, has rejected the reform proposal and is now putting the question in a negative way to the Greek people, which is an unfair way of putting the question," Eurogroup president Jeroen Dijsselbloem told a press conference.

"Given that situation, I think we might conclude that however regretful, the program will expire Tuesday night," the Dutch minister said.

Underscoring Greece's perilous position in the currency union, Dijsselbloem said the other 18 eurozone finance ministers would now hold fresh talks without Greece present to discuss the "consequences" and "prepare for what's needed to ensure the stability of eurozone remains at its high level."

Greece fears ‘permanent’ damage

The Greek parliament will vote on whether to go ahead with the referendum at midnight  (2100 GMT), after an address by Tsipras.

The outspoken Varoufakis warned that the decision could permanently damage the single currency, formed in a bid to bring unity to a once fragmented continent.

"The refusal of the Eurogroup today to endorse our request for an extension of this agreement for a few days or a couple of weeks ...will certainly damage the credibility for the Eurogroup as a democratic union and I am very much afraid the damage will be permanent," Varoufakis said.

But he said he was "still fighting" for a deal, and insisted the radical leftist Syriza government would "honor the verdict of the Greek people" in the referendum.

A Eurogroup statement issued after the meeting said it was "supported by all members... except the Greek member."

Greece's negotiations with its international creditors that have dragged on since January, when Tsipras's Syriza party first took power on a promise of ending austerity after two EU-IMF bailout programs since 2010, worth 240 billion euros.

Syriza has repeatedly refused to make cuts to pensions and changes to the VAT system demanded by Greece's bailout monitors: the European Commission, European Central Bank and International Monetary Fund.

A week of intensive talks in Brussels ended with Greece's creditors on Friday offering Athens a five-month, 12-billion-euro ($13.4-billion) extension of its rescue program, on condition it committed to fresh reforms.

Germany's hardline pro-austerity finance minister Wolfgang Schaeuble said the Greek government had "ended the negotiations unilaterally" and rejected that offer.

ATM queues

The European Central Bank will now play a crucial role in ensuring Greece's banks have the cash to open on Monday, and two top Tsipras aides were meeting ECB head Mario Draghi in Brussels on Saturday.

The governing council of the ECB was also reported to be meeting on Sunday, and was "closely monitoring developments", the bank said.

Greece was stunned by the referendum announcement by radical leader Tsipras, which came just hours after he had been at a summit with European leaders in a bid to end the crisis.

"The people must decide free of any blackmail," the 40-year-old prime minister said in a televised address to the nation late on Friday.

"We were asked to implement austerity measures... allowing the deregulation of the labor market, pension cuts, and an increase in VAT on food products, targeting the humiliation of an entire people," Tsipras said in his address.

Queues built up at cash machines in Athens. In Greece's second city, Thessaloniki, some banks have run out of money, according to an AFP reporter, while a National bank branch had a queue of 50 people.

"I have a shop. I came to the bank to withdraw as much money as I can in order to cover the needs of my shop for next week," 42-year-old Maria Kalpakidou told AFP.

Demand at petrol stations was also said to have "heightened" but there were no fuel shortage problems, according to state news agency ANA.

Draghi has been keeping the Greek banking system alive with near-daily cash infusions as it is frozen out of the capital markets.

The Eurogroup will now discuss worst case scenarios, ranging from a Greek default next week to a possible exit from the eurozone and even, as suggested by the Greek central bank, the 28-nation European Union. — Agence France-Presse

source: gmanetwork.com

Wall Street edges up in quiet session; Nasdaq ends at record

U.S. stocks ended with slight gains on Tuesday, with the Nasdaq eking out another record close while investors continued to await clarity on whether Greece could reach a deal to prevent defaulting on its loans.

The day's action was quiet, with trading volume below average. While energy shares rose alongside a jump in the price of crude oil, a sharp rise in the U.S. dollar capped broader gains.

While there were no major developments involving Greece, investors continued to hope that the country's newest budget proposals - introduced on Monday - would avert a looming default.

Greece needs fresh funds to avoid defaulting on a $1.8 billion debt repayment to the International Monetary Fund on June 30. Equities have been largely driven by Greece lately, with investors concerned that if the country defaults, it may have to leave the euro or the European Union, potentially shaking the region's economic foundations.

"The market seems to expect that this will end favorably, or at least benignly, but I think people need to be nimble right now as circumstances could change at any time," said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group in Greenwich, Connecticut.

"Greece may not be all that meaningful to the U.S. market, but it could have a big impact on the euro and the dollar, and it is unclear how big of an impact that will have on stocks."

The U.S. dollar index .DXY, which measures the greenback against a basket of currencies, rose 1.1 percent. A strong dollar is considered a headwind for equity prices as it weighs on the profits of multinational corporations.

U.S. crude futures settled up 1 percent at $61.01 per barrel, lifted ahead of U.S. inventory data expected to show strong demand for gasoline. The S&P energy index .SPNY rose 0.3 percent and was one of the day's top-performing sectors. Halliburton Co (HAL.N) rose 0.9 percent to $44.49.

AT&T Inc (T.N) rose 2.5 percent to $35.91 and was one of the biggest percentage gainers on the S&P 500 after at least two brokerages upgraded the stock.

Facebook Inc (FB.O) shares rose 3.7 percent to $87.88, a record close. With the day's gains, the social network's market value is now bigger than that of Dow component Wal-Mart Stores Inc (WMT.N).

The Dow Jones industrial average .DJI rose 24.29 points, or 0.13 percent, to 18,144.07, the S&P 500 .SPX gained 1.35 points, or 0.06 percent, to 2,124.2 and the Nasdaq Composite .IXIC added 6.12 points, or 0.12 percent, to 5,160.10. The Nasdaq ended at a record while the S&P 500 closed 0.3 percent below its own record.

Advancing issues outnumbered declining ones on the NYSE by 1,772 to 1,276, for a 1.39-to-1 ratio on the upside; on the Nasdaq, 1,567 issues rose and 1,203 fell for a 1.30-to-1 ratio favoring advancers.

The S&P 500 posted 43 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 180 new highs and 23 new lows.

About 5.4 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 6.15 billion. — Reuters

Behind the scenes, Greece and creditors push for breakthrough

ATHENS/BRUSSELS - Greek Prime Minister Alexis Tsipras spoke to the leaders of Germany, France and the European Commission by phone on Sunday in an attempt to break the deadlock over a cash-for-reforms deal as time runs out to save Greece from bankruptcy.

After months of wrangling and with anxious depositors pulling billions of euros out of Greek banks, Tsipras's leftist government has signaled a willingness to make concessions in order to unlock 7.2 billion euros in bailout money.

But a day before an emergency summit in Brussels, it is still unclear how far Tsipras, elected in January on a pledge to lift his people out of years of austerity, will yield.

His Syriza party plans a rally in Athens to send "a loud message of resistance" against demands for more cuts and tax hikes in a country battered by years of recession.

But the mood has also hardened in Germany, which has contributed more money than any other country to bailing out Greece. German Chancellor Angela Merkel is under pressure from within her ranks not to give in to Greek demands, even if that means contemplating Greece leaving the euro zone.

Athens urgently needs access to funds to avoid defaulting on a 1.6 billion euro IMF loan that falls due at the end of the month. But as the crisis gets pushed from one meeting to the next, each side has put the responsibility on the other's shoulder for finding a deal.

Money has drained out of Greek banks after a breakdown in talks last weekend, and Greece might have to impose capital controls within days if there is no breakthrough.

Tsipras called Merkel, French President Francois Hollande and Juncker with the latest Greek offer over the weekend.

"The prime minister presented the three leaders Greece's proposal for a mutually beneficial agreement that will give a definitive solution and not a postponement of addressing the problem," a statement from Tsipras's office said.

His government was holed up in an hours-long cabinet meeting on Sunday. Over the weekend, senior European officials have remained in close contact ahead of a meeting of finance ministers and euro zone leaders on Monday.

"Everyone's talking to everyone," an EU official said. "We're continuing to work informally on a solution."

No to blackmail

For a deal to work, Tsipras will need a solution that is acceptable to his party or else may be pushed to call a snap election or a referendum to secure a mandate for an agreement.

Under the austerity measures imposed by the IMF, the European Union and the European Central Bank in two bailouts, Greece's economic output has fallen 25 percent, wages and pensions have been slashed, and one in four Greeks is jobless.

The Greek government has resisted demands for pension cuts or tax rises, arguing that the austerity imposed on the southern European country had made the crisis worse. A senior Syriza lawmaker said on Sunday that previous ideas put forward by Juncker would have led to a "social holocaust".

"Democracy cannot be blackmailed, dignity cannot be bargained," the Syriza party said in a statement on Sunday, announcing its planned protest.

"Workers, the unemployed, young people, the Greek people and the rest of the peoples of Europe will send a loud message of resistance to the alleged one-way path of austerity, resistance to the blackmail and scare-mongering."

European ministers have played down the prospect of a final agreement on Monday but hope a political understanding can be reached in time for a full deal by the end of June.

Merkel's Bavarian allies warned against giving in to Greece, with senior Christian Social Union lawmaker Hans Michelbach saying he saw no realistic chance of an agreement on Monday.

"If the EU lets the government in Athens get away with its intransigence, we can bury the euro," Michelbach said in a statement on Sunday.

"Either Greece declares itself willing for a viable solution or the country must leave the euro. The euro zone could cope with the consequences of a Greek exit," he said. — Reuters

Nasdaq tops dotcom high on buoyant data, Greece hopes

The Nasdaq Composite index surpassed the 15-year all-time high it set during the peak of the dotcom bubble as more data on Thursday showed the U.S. economy was gathering steam.

The index hit 5,143.31, topping the previous high of 5,132.52 it touched on March 10, 2000. The S&P and Dow were at their highest levels in about a month.

Brian Fenske, head of sales trading at ITG in New York, said the Nasdaq was on firmer footing and there were no similarities between its rally in 2000 and the surge in recent months.

"The current rally is more durable. It is incredibly tough to go public in this market. We just didn't have this kind of scrutiny back in 2000," said Fenske.

U.S. stocks briefly extended their rally on an unconfirmed report in German daily, Die Zeit, that Greece's aid will be extended until year-end but the IMF would not take part in the financing for the "time being".

Greek Finance Minister Yanis Varoufakis presented new proposals to counterparts in the euro zone meeting in Luxembourg, a Greek government official said.

The Fed said on Wednesday that the U.S. economy was likely strong enough to withstand an interest rate increase later this year but cut its economic growth forecasts for 2015.

Even though a majority of Fed officials continue to see higher rates by the end of 2015, they expect rates to rise slightly less by the end of 2016 and 2017 than they did in their March forecasts.

U.S. consumer prices in May recorded their largest increase in more than two years as gasoline prices surged, while factory activity in the U.S. mid-Atlantic region expanded in June at a faster pace than expected.

Other data showed the labor market tightened as first-time applications for unemployment benefits declined to a near 15-year low last week.

At 13:31 p.m. ET (1731 GMT) the Dow Jones industrial average was up 188.94 points, or 1.05 percent, at 18,124.68, the S&P 500 was up 19.16 points, or 0.91 percent, at 2,119.6 and the Nasdaq Composite was up 63.62 points, or 1.26 percent, at 5,128.50.

All the 10 major S&P 500 sectors were higher with the health index leading with a 1.4 percent rise.

Microsoft's 1.4 percent rise lifted the Nasdaq and the S&P 500, while 3M's 1.9 percent gain was the biggest boost to the Dow. All 30 Dow components were in the black.

Fitbit shares ran up as much as 60 percent to $31.90 in their debut, valuing the maker of popular wearable fitness-tracking devices at $6.5 billion.

Oracle shares fell as much as 8.7 percent to $40.97 - a nearly six-month low - a day after the company forecast a quarterly profit below analysts' estimates.

Advancing issues outnumbered decliners on the NYSE by 2,228 to 775. On the Nasdaq, 1,978 issues rose and 761 fell.

The S&P 500 index showed 40 new 52-week highs and two new lows, while the Nasdaq recorded 144 new highs and 25 new lows.  — Reuters