European Markets Higher on Greek Agreement, Hermes Sales Up 18%

Devan Biswas
09 Feb, 2012
New York City

European markets closed ahead of the euro zone finance ministers meeting. Greek parties agreed on the broad points of labor reforms and government spending cuts after all night marathon negotiations as Greek economy descends deeper into recession.

[R]4:30 PM Frankfurt – European markets closed ahead of the euro zone finance ministers meeting. Greek parties agreed on the broad points of labor reforms and government spending cuts after all night marathon negotiations as Greek economy descends deeper into recession.[/R]

Greek negotiations reached a new hurdle after what appears to be a broad agreement on the bailout terms and labor reforms after marathon negotiations all night ahead of the euro zone finance ministers meeting today.

European Central Bank President Mario Draghi confirmed at a news conference hours ago that leaders of Greek parties have agreed to demands of international lenders according to a call from Greek Prime Minister Lucas Papademos.

Draghi told a news conference in Frankfurt, “Prime Minster of Greece confirmed that an agreement had been reached and has been endorsed by the major parties.”

The agreement still needs approval from the Greek parliament. Greece is schedule to pay €14.5 billion of interest payment on March 20.

However, the fine print of the agreement indicates another story. Greek leaders agreed to cut minimum wages by 22% but did not approve the elimination of holiday pay for private sector. The leaders also agreed to cut government spending and increase taxes that will have €13 billion impact on the government budget but decided to lower pension payments.

Meanwhile, Greece has been falling further into recession as December industrial production declined 11.3% and Value Added Tax collection in January dropped 18%.

Privately, Greek officials confirmed to 123jump.com that leaders of three parties are in agreement with 85% of cuts demanded by the troika but cuts in pension costs are hard to resolve.

Greek negotiators may have agreed on labor reforms and other government spending cuts but getting it implemented may be another story. Two largest labor unions called 48-hour strike on Friday and Saturday against the agreed reforms by all parties.

In London, FTSE 100 index closed up 0.2% or 14.40 to 5,890, in Frankfurt DAX 30 index added 11.1 to 6,760 and in Paris CAC 40 index increased 5.6 to 3,416.

Stock Movers

The French luxury goods maker Hermes International SCA declined €2.05 or 0.8% to €261.75 after it reported sales in 2011 increased 18.3% to €2.84 billion ahead of its own forecast of increase between 15% and 16%. Operating margins in the year increased to 30% from 27.8% in 2010.

The company also said today it bought back €286 million of its own stocks in the last year.

Renault SA increased 51 cents to 37.35 and the French auto maker opened a new low cost manufacturing facility in Morocco.

The 32 million square feet facility near Tangiers will begin with production of new minivan Lodgy that is expected to be price below €12,000 in Europe compared to other minivans that sell for €20,000.