Greek Negotiations Drag on Labor Reforms; Xstrata, Glencore Merger Talks

Devan Biswas
06 Feb, 2012
New York City

European markets eased as all eyes were focused on the Greek negotiations. Political leaders of France and Germany pressed Athens for quick actions and said time is running out as Greek politicians held firm on labor reforms. Xstrata and Glencore are expected to announce a deal as early as tomorrow.

[R]5:40 PM Frankfurt – European markets eased as all eyes were focused on the Greek negotiations. Political leaders of France and Germany pressed Athens for quick actions and said time is running out as Greek political parties held firm on labor reforms. Xstrata and Glencore are expected to announce a deal as early as tomorrow.[/R]

Financial markets focused one more time on Greece and the confusion, delays and rising costs of bailout put most investors in Europe on edge. The delay also prompted leaders of France and Germany to urge Greece to finalize the agreement.

Political leaders of Greece delayed the meeting to decide the labor reforms by one day to tomorrow as disagreements ran high on lowering minimum wage, pension contributions and supplement bonuses.

The troika of international lenders is firm on labor reforms and are seeking cuts of at least 2 billion euros from government spending as the debt to gross domestic product continues to escalate.

German Chancellor Angela Merkel in Paris said she wants quick actions from Athens and failure to strike a deal could risk the next tranche of the bailout. She also added, “We want Greece to stay in the euro. I want to make clear once again that there can be no deal if the troika proposals are not implemented. They are on the table, time is of the essence.”

The latest data from the European Union statistics agency Eurostat in Luxembourg reported Greece’s debt rose to 159.1% of GDP in the third quarter from 138.8% in the quarter a year ago. The E.U. has estimated the debt ratio to surge to 162.8% in 2011 for Greece, sharply above the 60% target set for the euro zone members.

The statistical agency also said the debt ratio for Italy rose 0.5 percentage point to 119.6% in the third quarter and Portugal’s ratio increased 18.9 percentage points to 110.1%. Ireland’s debt ratio also increased to 104.9%.

The lack of decision between Greece and international lenders rattled market indexes across Europe.

The DAX index decreased 14.1 or 0.2% to 6,753 and CAC-40 index fell 29.1 to 3,399. The FTSE 100 index decreased 18.3 or 0.3% to 5,883.

The euro declined 0.5% to 1.303 after the lack of agreement in Greece dragged the currency and added volatility in the metals markets. Against the yen, the euro held at 100.01 yen and decreased 0.1% to 1.2065 Swiss francs.

Former chief of Israel’s spy agency Mossad, Efraim Halevy confirmed in a television interview with Russia based RT that Israel has been “engaged in a clandestine war with Iran for a while.”

He also added that the current regime in Syria will fall and Israel is not playing “any role in the current violence in Syria” but the fall of Syria will be chaotic and is expected to have “long term implications for the nation and its neighbors.”

Stock Movers

Banks closed higher as the added liquidity from the European Central Bank has bolstered the liquidity in the system.

Deutsche Bank decreased 55 cents to €33.60, Societe Generale SA fell 2.5% to €23.64 and Intensa Saopaolo SpA edged down 2 cents to €1.54.

Daimler AG increased 40 cents to €45.65 and Volkswagen AG added 47 cents to €128.39.

BHP Billiton plc declined 6.5 pence to 2,220 pence and Rio Tinto plc dropped 1.1% to 3,941.50 pence.

Xstrata plc declined 2.5% to 1,250.50 pence after the company entered into final discussion with Glencore for the proposed merger of $80 billion. Xstrata shareholders are looking for at least 10% premium that recognizes company’s growth prospects.

Xstrata share has jumped more than 33% in the last week from the average price in the last three months before the release of the deal prospect. Glencore controls 34% in the miner and is the single largest shareholder in the company.

EADS traded higher after its plane maker subsidiary Airbus said it received 91 plane orders in January and delivered 37 planes in the month. Airbus in the month received 33 orders for the newly designed A320 neo and 18 single aisle A320 planes from Avaianca Taca.