8/14/2019 Banks Falter as Traders Await Greece Plan

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Banks falter as traders await Greece planBy Anjli Raval

Published: February 11 2010 10:49 | Last updated: February 11 2010 15:25

European banking stocks failed to hold intraday gains on Thursday as equities traders waited

for more details of the European Unionrescue package for Greece.

EU president Herman Van Rompuy said a deal had been reached in principle but investors

awaited information about the specifics of the aid package.

Greek banking stocks lost gains in nervous trade as investors continued to wait for the finer

points of the plan. Their Portuguese and Spanish peers were also unsettled as attention moved

to other periphery countries with large fiscal deficits.

The Greek government has not requested any financial support, Mr Van Rompuy told

reporters.

He said the EU was ready to engage in determined and co-ordinated action, if needed, to

assist Greece, but details have yet to be given.

Mikael Nilsson at Barclays Capital said: The main focus today will be on what kind of

support Greece will receive from other euro area members. It is not clear if any detailed plans

will be announced, but in our view, the simple fact that there seems to be a broad agreement

to give support, if needed, should be helpful.

We suspect that Germany and other nations will try to see if that combined with moral

suasion on speculators will be sufficient to stabilise the situation without any hard

commitment.

This was reiterated by analysts at UBS who said: An unnamed German government official

was also reported as saying ... that an announcement of concrete steps was unlikely. The

official said that EU leaders are likely to seek more information on Greeces budget cuts but

stop short of announcing an aid package at the meeting. A general announcement

demonstrating a political commitment to support Greece could be forthcoming, however.

However, analysts at BNP Paribas said before the summit that ministers must come up with a

eurozone-wide solution as a Greek specific solution will make the market only concentrate

on its next victim which would be Portugal.

Rating agency Moodys commented overnight, saying that neither Portugal nor Spain would

need to be bailed out or supported as they do not share the same debt problems as Greece. Itwent on to say that if the rescue package for Greece is unconvincing in size or urgency, or if

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Athens looks like it is unable to implement required conditions, then markets may remain

unsettled and the turbulence may spread.

Spanish, Portuguese and Greek banking stocks dipped lower.

Portugals biggest listed bank Millennium BCP lost 1.7 per cent to 0.77 while Spanishbanks were also lower; Banco Santander lost 3.6 per cent to 9.63 and BBVA fell 2.4 per

cent to 9.90.

In Greece, EFG Eurobank lost 2 per cent to 5.88 and Alpha Bank fell 2.4 per cent to

6.88.

Any support from the EU leaders is likely to require a big commitment from Athens on

getting its economy in order. The government has already announced an across-the-board

wage freeze for public sector workers and a 10 per cent reduction in allowances equivalent

to a pay cut of 4 per cent.

George Papandreou, prime minister, also signalled his commitment to implementing key

pension reforms by announcing that the retirement age would be raised, although he gave no

further details.

Jrgen Michels at Citigroup said that there was also more action from the Greece side late

yesterday ... In addition, the cabinet decided to lower the income bracket for the upper tax rate

[40 per cent] from 75,000 to 60,000.

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