Greece Identifies EU325 Million in Budget Cuts, Papademos Says

Prime Minister Lucas Papademos said Greece found all the extra cuts needed to lower spending by 325 million euros ($427 million) to secure a bailout aimed at averting the region’s first sovereign default.

The government identified “a series of additional measures amounting to 125 million euros in order to complete the package of budget cuts worth 325 million euros,” Papademos told ministers at a meeting of the Cabinet in Athens yesterday, according to an e-mailed transcript.

Finance ministers from all 17 euro-area countries meet in Brussels tomorrow as governments close in on a deal to unlock a 130 billion-euro aid package for Greece, the second such international bailout of the country in two years.

Italy, Spain Cut by Moody’s; U.K. Top Rank at Risk

Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal and said it may strip France and the U.K. of their top Aaa ratings, citing Europe’s debt crisis.

Spain was downgraded to A3 from A1 yesterday, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

“Policy makers have made steps forward but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London.

German Investor Confidence at 10-Month High

German investor confidence surged to a 10-month high in February as global growth improved and Europe’s debt crisis showed signs of abating.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 5.4 from minus 21.6 in January. That’s the highest since April 2011 and the third straight increase.

“The outcome is a positive surprise,” said Annalisa Piazza, a fixed-income analyst at Newedge Group in London.

Stocks, Euro Rise as Greece Approves Austerity Plan

Stocks advanced, rebounding from the biggest loss this year, and the euro strengthened while German bonds fell after Greek lawmakers approved austerity plans to secure rescue funds. Oil led commodities higher.

The MSCI All-Country World Index (MXWD) added 0.6 percent at 8:15 a.m. in New York.

Futures on the Standard & Poor’s 500 Index climbed 0.7 percent.

The euro strengthened 0.5 percent to $1.3263, while the yen weakened against all 16 most-traded currencies.

The yield on the benchmark 10-year bund jumped six basis points, with the 10-year Italian yield falling 13 basis points. The S&P GSCI gauge of commodities rose 0.9 percent.

Euro Falls on Concern Greek Talks Will Stall; Yen Approaches Postwar High

The euro weakened versus the yen and the dollar as Greece struggled to reach an agreement with bondholders on cutting the nation’s debt burden, stoking concern Europe’s crisis will deepen.

The common currency fell against 14 of its 16 major counterparts as Spanish bonds declined after the nation sold debt today.

The yen rose to within 1 percent of a postwar high against the dollar, prompting speculation Japan will intervene to limit the currency’s gains.

The euro briefly erased losses after China’s Premier Wen Jiabao said his nation supports European efforts to stabilize the 17-nation currency.

Stocks, Euro Rise on Greek Debt Talks

Stocks (MXWD) climbed around the world, heading for the best January since 1994, the euro strengthened and commodities gained after most countries in Europe agreed to tighter budget controls and Greece made progress on debt talks.

The MSCI All-Country World Index (MXWD) rose 0.6 percent at 9:30 a.m. in New York, taking its monthly gain to 6.2 percent.

The Standard & Poor’s 500 Index added 0.4 percent and is up 4.8 percent in the month.

The euro appreciated 0.2 percent to $1.3169, set for its first monthly advance since October.

Greece, Bankers Expect Debt-Swap Deal This Week

Greece and its private creditors said they expect to complete a debt-swap accord this week after bondholders signaled they would accept European government demands for lower interest rates.

The sides are “close” to completing a voluntary exchange within a framework outlined by Luxembourg Prime Minister Jean- Claude Juncker, the Institute of International Finance, negotiating on behalf of private creditors, said in an e-mailed statement in Athens yesterday.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.

Fitch Cuts Italian, Spanish Ratings

The credit ratings of Italy, Spain and three other euro-area countries were cut by Fitch Ratings, which said the five nations lack financing flexibility in the face of the regional debt crisis.

Italy, the euro area’s third-largest economy, was cut two levels to A- from A+.

The rating on Spain was also lowered two notches, to A from AA-.

Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained.

The downgrades, flagged a month ago by Fitch, come as Greece negotiates with creditors on how to avoid a default and other euro nations struggle to bolster the region’s defenses against contagion should those talks fail.

Italy Sells Maximum EU11 Billion of Bills

11 billion euros ($14.5 billion) of Treasury bills today, meeting its target, and borrowing costs plunged from the previous sale.
The Rome-based Treasury sold 8 billion euros of 182-day bills at 1.969 percent, the lowest since May and down from 3.251 percent at the last auction of similar-maturity securities on Dec. 28.

Investors bid for 1.35 times the amount offered, down from 1.69 times last month. The Treasury also sold 3 billion euros of 331-day bills at a rate of 2.214 percent.

“Bond auctions in Italy are no longer nerve-wracking affairs,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by e-mail.

U.S. Stock Futures Decline as Rating Cuts Increase Euro-Area Debt Concern

U.S. stock-index futures dropped after Standard & Poor’s cut the credit ratings of nine euro-area nations, including France, signaling the region’s debt crisis is worsening.

Carnival Corp. (CCL) tumbled 15 percent in German trading after its Costa Concordia cruise liner ran aground off Italy’s Tuscan coast, killing at least six people and injuring 60.

S&P 500 Index (SPX) futures expiring in March declined 0.2 percent to 1,286.2 at 1:19 p.m. in London. The equity gauge climbed 0.9 percent last week and reached a five-month high on Jan. 12. U.S. stock markets are closed for the Martin Luther King Jr. holiday today. Futures on the Dow Jones Industrial Average dropped 14 points, or 0.1 percent, to 12,376.