Debt crisis: as it happened February 17, 2012 Dow +0.4pc S&P 500 +0.2pc Nasdaq -0.3pc Dow closes at its highest level since ay 2008 on Greek hopes. It has also been a great week for economic data in the US, especially jobless figures. Philip Orlando, chief equity strategist at Federated Investors, told Bloomberg: Greece is the word. We're just reacting to what the euro zone is telling us in terms of the state of negotiations. Do I believe that the eurozone will give Greece more money? Otherwise, Greece defaults. 20.32 The Dow Jones and Wall Street Trader on the euro: 20.04 Ah, we believe Posen (see 19.39) was talking about the UK, as he has added that UK business investment is likely to improve. He told the Warwick Economics Summit he expects UK productivity to return to trend in one or two years, but that the eurozone crisis could still throw the UK off "horribly." He also says that QE is not going to cause inflation, which will keep falling and probably go below the 2pc target. He is personally comfortable with BoE's growth and inflation forecast. Interestingly, Posen says that UK banks are facing similar issues to Japanese banks in the 1990s. 20.02 Among all this Greek news, on Wednesday we reported that World Bank President Robert Zoellick is stepping down in June. The World Bank has just announced that nominations for his successor must be submitted by March 23. After that the Bank will draw up a shortlist of three candidates, publishing their names if there is an agreement. It expects to name a new President by April 20. 19.44 I have just remembered that US markets are closed on Monday for Presidents' Day. A lucky escape for the Dow after the Greek bail-out meeting? US investors will have to wait until Tuesday to react to the Euro Group's decision (or lack of one). 19.39 The Bank of England's Adam Posen has said that the economic situation is "not a good one" but not a "disaster" due to policy action. We're unsure at this time which economic situation he is talking about. Europe? 19.34 Paul Mason, Economics Editor for Newsnight, believes the Greek people are losing confidence in their country: I have been reporting the Greek crisis now for two years, intermittently on the ground, and it looks like something changed, tangibly, in the past 10 days. The established parties lost belief in what the EU is forcing them to do; parts of the EU lost belief in it too; and the people - quite wide layers of society - lost belief in the political class. I think this week caught Greece on the proverbial brink of something. The anger could easily solidify into anti-German sentiment, but with the conservatives and Orthodox right implicated in the first bailout, anger can more easily flow to the left. 19.27 More on the news that Italian police have seized $6 trillion of fake US Treasury bonds in Switzerland: 19.01 In case you missed it earlier, we have put together a slideshow of Greeks displaying their anger towards Germany amid a crippling debt crisis. 18.43 Quick update on the US markets: Dow +0.3pc (currently at four-year high) 18.26 Lucas Papademos, Greek Prime Minister, is to hold a cabinet meeting at 2pm (Athens time) tomorrow. Meanwhile, Germany's finance minister, Wolfgang Schaeuble, has admitted that Greece's 2020 debt target could be 123pc of GDP. Yesterday it was reported that the bail-out would only bring debt down to 129pc of GDP, far from the 120pc target. Schaeuble says that Europe must ensure Greece aid is used first for debt service, and that the euro is "safe" and will remain a "stable currency." He adds that Italy's PM Mario Monti sets the example of how to solve a debt crisis. Is there a bro-mance brewing? 18.10 The age of austerity obviously does not include fans of rich cars. Ferrari has revealed that revenues reached €2.251bn, up 17.3pc, in 2011, while a record 7,195 cars were sold, up 9.5pc on the previous year's figure. The company said it achieved record sales in 2011 in America and in the Greater China Area - which has become Ferrari's second largest market - while it also performed well in the Middle East, with a 22pc increase in sales. Demand was also up in Britain, Germany and Switzerland in particular. 17.45 Jeremy Warner, assistant editor of The Daily Telegraph, has written a counter-article to Ambrose Evans-Pritchard's comparison of Greece and the Melian Dialogue of Thucydides: I see that my colleague, Ambrose Evans-Pritchard, has quoted extensively from Thycydides' History of the Peloponnesian Wars to demonstrate how bully boy treatment of the underdog is not just callous and inhumane, but ultimately self defeating. The reader is rightly invited to draw a parallel between the appalling punishment which Athens meted out to the Melians back in the fourth century BC, and today's treatment of Greece by the Germans. I've no idea what translation he was citing, but would urge alternative use of the far superior version penned by my grandfather, Rex Warner. Obviously, I'm biased, not to mention the small stipend that these translations still contribute to the Warner family estate. Go buy. But in any case, here's a link to the same dialogue, as translated by my grandfather, which has somehow mysteriously managed to get round the copyright laws. 17.40 Still on Greece, and prolific financial tweeter Zerohedge: In case you are wondering, CAC stands for Collective Action Clause. 17.34 Euro Group chief Jean-Claude Juncker: [It would be] wise, judicious and commendable for us to agree on the contours of a second programme [on Monday]... There is a great need to reach a global agreement, at least on the PSI, during the meeting... I don't have this list of demands. I will not negotiate with the [Greek] far-left and the far-right. The US Senate has approved a payroll tax cut extension and has sent it to President Barack Obama to sign into law. 17.10 It's past 5pm, which means that the French franc is now officially out of circulation, after 650 years. It is estimated that at the end of 2011 there were still 50m franc notes in circulation and the French Government predicts that €100m worth of these notes - around a fifth - will not be exchanged today, having been lost or squirrelled away as souvenirs...All of the notes exchanged for euros by the central bank will eventually be recycled into paper bricks and burnt as fuel. 16.38 AFP has quoted Greek labour ministry sources saying that the country has decided on further pension cuts to fill a gap holding up an EU-IMF debt rescue package. State pensions of more €1,300 per month will reportedly be cut by 12pc, having been reduced by 10pc in 2010 as the then government tightened spending to meet the terms of a first EU-IMF bailout. Additional pension payments will be progressively hit above €200 per month, with a payment of €300 to be cut by 20pc, the sources said. 16.34 European markets have closed. Markets jump on hopes that a Greek bailout will finally be agreed on Monday. 16.31 Faisal Islam, economics editor for Channel 4 News, turns his attention to German politics: 16.28 America's Dow is on course for its best close since May 2. It's up 0.2pc today at 12927.85. It's at a four-year trading high at the moment. It has been a great week in the US for data releases, with jobless figures especially surprising analysts. 16.09 After meeting Italian PM Mario Monti, Canada's Finance Minister Jim Flaherty says he is "cautiously optimistic" that the Greek bailout deal will be signed next week. Meanwhile, Steffen Seibert, Angela Merkel's chief spokesman, says Merkel, Monti and Papademos are confident euro area finance ministers will "find a solution for open [Greek] questions" on Monday. German Finance Ministry spokesman Martin Kotthaus also sees the "basis" for a decision on Greece on Monday, but more signatures from Greek parties would be welcome. 16.03 Jean-Claude Juncker, head of the Euro Group: We are far away from the objective of reducing Greece's debt-to-GDP ratio to 120pc by 2020. He hopes eurozone officials can find a way to get closer to the target by Sunday night. 15.47 Fitch has raised Iceland to BBB- with a stable outlook, so the country is now investment grade once again. Ratings agency believes the country is relatively unaffected by the eurozone sovereign debt crisis and doesn't see it slipping back into recession. 15.45 The EFSF has launched the European Sovereign Bond Protection Facility, aimed at boosting demand for new bond issues. It will only be activated on request by a member state. 15.37 AFP is reporting that eurozone central banks are now exchanging Greek bonds. The debt swap "is in progress. The aim is to curtail any losses," a source claimed. 15.12 The Wall Street Journal and Dow Jones are reporting that the IMF is contributing just €13bn to the €130bn Greek bailout. The smaller contribution reportedly reflects fears from some IMF members that that it is becoming over-exposed to the eurozone. They add that eurozone governments will have to provide a much bigger share of funds than in three earlier bailouts. 15.01 The leader of bailed-out Portugal's main opposition party is pressing the government to ask international lenders for a one-year extension on the country's debt reduction targets. Debt-stressed Portugal is locked into an austerity program through 2013 in return for last year's €78bn financial rescue. The austerity measures are widely blamed for a deepening recession and a record 14pc jobless rate. 14.47 US markets are open. The Dow Jones Industrial Average is up 30.35 points (0.24pc) to 12,934.43, the S&P 500 has added 3.46 points (0.25pc) to 1,361.50, while the Nasdaq has fallen 3.61 (0.12pc) to 2,956.24. Investors are concerned over whether Greece will get its bailout deal, and the mood was tempered by data that showed a slight uptick in inflation last month. Italian police have seized about $6 trillion of fake US Treasury bonds in Switzerland. 14.37 Spain's new conservative government says it is placing a cap of €105,000 on annual salaries for state company directors as part of its austerity push to reduce the country's swollen deficit. Deputy Prime Minister Soraya Saenz de Santamaria (pictured above) said the government will also restructure public sector companies down from the current 4,000, and limit the number of directors such entities can have on their boards. She said the measures would trim up to 35pc from the wage bill. 14.21 Dow Jones is reporting that the €50bn ECB Greek bond exchange has taken place. Apparently this only relates to its Securities Markets Programme (SMP), and the discussion over the swap was "lively." Dow Jones also says that the Bundesbank doesn't hold Greek bonds outside SMP, and the new bonds are under Greek law. 14.13 So, what would your plan for Greece be? That's the subject of an interesting interactive feature on crookedtimber.org. Simply select one answer for each question and you will be shown how you would solve the debt-stricken country's crisis. Very entertaining, and a lot easier than the real thing. 13.57 Dutch Finance Minister Jan Kees de Jager has said if one total package for Greece does not work then alternatives will be looked at. He added that Europe doesn't want to see a disorderly default nor Greece's exit from the eurozone. He also favours an escrow account for Greek debt. 13.52 The euro area's current account position actually improved last year: for a bigger version of this graph, click the right-hand-side of the main picture at the top of this blog 13.46 Quick update on the markets: European shares have today risen to their highest level in more than six months, on optimism that eurozone officials would sign off a rescue package for Greece, helping the country to avoid a messy default. Eurozone banks have today risen 1.8pc, and 15pc so far this year. Ian King, head of international equities at Legal & General, said: Every dip in the [banking] sector has been perceived as a buying opportunity. Given the extent to which funding is being made available, a European bank would have to try very hard to go bust. And if you use the banking sector as a microcosm of what's going on, the outlook is reasonably good for equities. 13.40 The International Monetary Fund says it will hold talks with Romania's new prime minister, weeks after his predecessor resigned following weeks of protests over IMF-imposed austerity measures. Mihai Razvan Ungureanu - premier since February 9 - has pledged to respect agreements with the IMF, the European Union and the World Bank, which gave the country a bailout loan of €20bn in 2009. US CPI for January rises 0.2pc, analysts expected an increase of 0.3pc. Still, it was the biggest rise in four months, as the price of petrol jumped, highlighting a growing concern that higher energy costs could slow the economic recovery. 13.29 Two robbers who broke into a bank in Italy earlier today apologised to employees, saying that they were forced to steal because of the economic crisis, before making off with €10,000. "Stay calm and we are sorry for the inconvenience but there is a crisis," one of the balaclava-clad men said during the robbery on a branch of Banca Monte dei Paschi di Siena in Sardinia, ANSA news agency reported. 13.21 European Central Bank Governing Council Member Klaas Knot has said he hopes the EFSF is increased significantly. He also said eurozone bonds are not a "crisis instrument" and that more emphasis should be put on getting national debt to GDP ratios to less than 60pc. Meanwhile, we are hearing reports that the ECB is considering allowing Greek bonds to be subjected to PSI writedowns. 13.17 According to the AA, diesel has hit a new record high of 143.05p a litre in the UK. 13.14 India will not veer from its decision to award a $12bn contract to France for Rafale fighter planes, the Indian Air Force chief of staff has said. Marshal Norman Anil Kumar Browne told the US monthly Aviation International News at the Singapore Airshow: "We have a procedure as per the defense procurement policy that stipulates the contract goes to the lowest bidder," . India chose Dassault Aviation's Rafale plane over the Typhoon built by Eurofighter, a consortium made up of British group BAE Sytems, Europe's EADS and Italy's Finmeccanica. 12.54 France bids adieu to its former currency today. Not only is it the 10-year anniversary of the French adoption of the euro but also the last chance to cash in any spare francs. At 5pm tonight, as enforced by the Banque de France, the dead currency will officially lose its monetary value. It's estimated that at the end of 2011 there were still 50m franc notes in circulation and the French Government predicts that €100m worth of these notes - around a fifth - will not be exchanged, having been lost or squirrelled away as souvenirs. 12.41 The Daily Telegraph's european correspondent Bruno Waterfield reports the full details of Wulff's resgination and the impact on Merkel's political authority. 12.31 Brent oil prices hit an eight-month high today. Traders put this down simmering geopolitical tensions over key crude producer Iran and optimism the Greek debt crisis can be resolved. Brent North Sea crude for April delivery reached $120.70 per barrel, its highest point since June 14. It later pulled back to $119.84, down 27 cents from Thursday's closing level. 12.20 Currency trader Forex comments on the markets and that Friday feeling: Usually we see the euro and other risky assets sell off as we get to Friday as investors pare their risk into the weekend, but the Eurozone debt crisis is no longer "usual" and markets have got used to the epic ups and downs thus risk is in better mood as we head to the weekend. Take this week for example, at one point EURUSD was hovering below 1.30 on the back of rumours that Germany and other Northern European states would block the release of bailout funds for Greece and arrange a bridging loan to get Greece through its next bond redemption payment on 20th March - talk about living hand to mouth. The markets didn't react well to that because it essentially kicks the can down the road and doesn't deal with the long term solution of Greek insolvency. 12.11 Back to Paris and this time it was Sarkozy's turn to speak. The French president and supporter of the EU-led Tobin tax on financial transactions said, rather unconvincingly: I am a great admirer of Britain's support for the City. 12.07 The Daily Telegraph's Ambrose Evans-Pritchard delves into classics to address eurozone factions. Today's column Greece and the Melian Dialogue of Thucydides contains abridged dialogue between big bully Athens and minnow Melos. 12.01 Cameron and Sarkozy are currently presenting to the World's press in Paris. They pair have bonded over this morning's civil nuclear agreement but inevitably the conference is focussed on the French election, Syria and their relationship. Cameron looked down fondly on Sarkozy and said: UK and France relations are strong enough to survive differences. That's what politicians do. That's what friends do. Ahhhh. 11.54 Kevin Dunning, an economist with the Economist Intelligence Unit, says the effect of Wulff's resignation on policymaking will be negligible. 11.49 Here's some context to the ECB bond swap reported this morning. It's been revealed Eurozone central banking chiefs held a vote this week on a proposal to swap the Greek government bonds which had been bought at steep discounts. According to Die Welt, the swap was already agreed and in progress before the news broke. The planned completion date is Monday. 11.31 The Royal Bank of Scotland is the top stock gainer on the FTSE 100 today, up +3pc. Final results are issued next Thursday. 11.20 Stephen Robertson, director general of the British Retail Consortium warns it's discounting that's driving the growth in sales: These numbers are slightly better than we would have expected but make it clear that price-cutting by retailers is what's driving any growth in business. Discounting is biting into retailers" margins with non-food businesses facing particularly tough times. In his Budget next month the Chancellor must take steps to make it more attractive for retailers to invest and create jobs, and to improve UK competitiveness so they do that here. It's a mistake to see retail as a sitting duck. Retail investment is globally mobile and the UK has to fight for it. 11.14 Further quotes from Wulff's four-minute resignation speech: I have enjoyed exercising this office. Our country needs a president who can unhindered address the massive national and international challenges. The developments of the last few days and weeks have shown that this confidence and with that my effectiveness has continued to be affected. For this reason it is no longer possible for me to administer the office of the Federal presidency either domestically or abroad. The news reporting that we experienced in the last two months has hurt me and my wife. 11.05 Singapore-based bank DBS has finally announced the launch of its very first bond issue in China's onshore market. The People's Bank of China approved the distribution of Panda bonds last week. 10.58 The Office of National Statistics releases more detail on those January retail figures: 10.52 The markets seems unfazed by the flurry of news coming out of Germany. Following the shock resignation of president Christian Wulff the DAX is up 0.86pc to 6809.97. The FTSE continues rising to 5906.53 and the CAC at 3426.71. 10.45 More detail on Wulff's resignation speech. The former German president, who was caught up in a corruption scandal involving a dubious loan and an apparent attempt to blackmail a German tabloid, blamed the media and a "minority" for his resignation. 10.37 German Chancellor Angela Merkel stood briefly in front of her nation to explain Wulff's departure from office. In Berlin, Merkel spoke of her deep regret over the resignation and thanked the now former president and his wife for representing Germany abroad. She added: I am convinced we owe them thanks. 10.11 German President Christian Wulff steps down after multiple scandals. The German President had been under fire for weeks over a €500,000 personal loan he took at favorable interest rates to buy a home when he was governor. But prosecutors are more interested in Wulff's friendship with filmmaker David Groenewold, whom they believe may have treated the former governor to a vacation on the German holiday island of Sylt. The scandal took a new turn a day earlier when the state prosecutor asked the German parliament to lift the president's immunity to allow for an official investigation into the allegations. Addressing the German people live in Berlin this morning, Wulff said: I made mistakes but I was always sincere. A bad egg? Wulff gets pelted during an appearance in the city of Wiesbaden, near Frankfurt, Germany. 10.03 Food prices rose 26pc over the course of the downturn, the Daily Telegraph's James Hall reports. 10.00 A belated Christmas present for the high street. Sales rose unexpectedly in January at the fastest pace since April 2011. Shoppers splashed out on furniture and sports goods. Allister Heath, editor of London free-sheet City AM, Tweeted: 09.46 The European Central Bank will swap Greek bonds for new bonds to protect it from creditors. In the highly anticipated run up to a private sector debt deal, designed to save Greece from deafult, the ECB plan to swap bonds over the weekend. The terms remain the same but this move will spare the bank from forced losses. Foreign exchange experts, Clear currency, commented on the initial impact on the euro: Just as the markets looked like turning over and starting a downward spiral on the back of faltering Greek debt talks the ECB has injected some hope and with that the EUR has once again rallied, EURUSD having its first positive trading day in 5 days, having slipped under the 1.3000 level in early morning trade. 09.35 This morning, the Daily Telegraph's fraud reporter Jonathan Russell and banking correspondent Harry Wilson exclusively revealed the names of three senior RBS bankers arrested in a tax probe. Sign up to the City Briefing to get receive finance news from the Daily Telegraph at 8am every morning. 09.20 News of Merkel's cancellation came shortly after President Christian Wulff's office announced he would be making a statement at 10am GMT. Merkel is due to talk 30 minutes later. This all fuels speculation that Wulff will resign. The Daily Telegraph's European Correspondent, Bruno Waterfield, Tweets: 09.05 Not all European leaders are playing nicely this morning. German Chancellor Angela Merkel has delayed a meeting planned for today with Italian Prime Minister Mario Monti in Rome. No reason was given but according to officials Merkel picked up the phone to make her excuses personally. 08.42 The FTSE opened slightly up and now hovers around 5,908.54. News of the Anglo-French civil nuclear deal should heighten optimism. The markets are also responding well to public sector salary and defence cuts, offered by the Greek Government. The DAX hit 6,798.00, up 0.68pc, at 09.42 CET. The CAC was up 0.96pc at 3,425.99. Josh Raymond, chief market strategist at City Index, comments on the markets as the morning's activity unfolds: 08.35 The Royal Bank of Scotland's pay chief has spoken out in defence of Stephen Hester's £1m bonus. Penny Hughes, executive director and chair of the bank's renumeration committee, has backed her decision to award the chief executive £963,000. Ms Hughes told the Financial Times: Despite Hester's decision to waive the bonus, she called his job: The world's biggest corporate turnaround. 08.22 Despite euro zone tensions the UK and France have signed a landmark nuclear deal. David Cameron is travelling to Paris for talks with President Nicolas Sarkozy to close the deal. The PM believes it will generate £60bn for the UK economy and 30,000 jobs. The Daily Telegraph reports on this civil nuclear energy agreement resulting in the construction of a new generation of power plants on Britain's shores. 08.11 News Corporation boss Rupert Murdoch will today take charge of the crisis engulfing The Sun newspaper. In a few hours he's due to address staff at News International's HQ in Wapping, following the arrests of ten senior journalists last week. Business editor of The Sun comments on the media frenzy outside News International's HQ this morning: 06.50 There will be frantic queues at French banks today, but it's nothing to do with the debt crisis: this is the last day that people can exchange any remaining French francs for euros. It's estimated that at the end of 2011 there were still 50m notes in circulation. The Government predicts that €100m worth of these notes - around a fifth - will not be exchanged, being lost or squirrelled away as souvenirs.