European markets shrug off jitters over Greece as IMF pushes for debt relief

Emma Haslett
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The Greek government will enter into further negotiations today (Source: Getty)

European markets kept calm this morning, despite more jitters as the Greek government entered yet another round of talks with its creditors.

The FTSE 100 rose 0.43 per cent in mid-morning trading, suggesting market uncertainty over the election is muted, while Germany's Dax fell 0.23 per cent and France's Cac edged down 0.03 per cent.

Meanwhile, having risen in recent weeks, the price of the euro lost 0.54 per cent of its value against the dollar, falling to $1.1086.

The fall follows reports one of Greece's largest lenders has insisted some of its other creditors write off vast portions of debt, causing yields in two-year bonds to jump by more than one percentage point to 20.7 per cent, while 10-year notes rose to more than 11 per cent.

The FT reported yesterday that Poul Thomsen, head of the European department at the International Monetary Fund (IMF) and one of its lead negotiators with the Greek government, has warned that unless its European lenders write off some of its debt, it may hold back its portion of a €7.2bn tranche of cash needed to avoid bankruptcy.

The bailout is now urgent: if Greece doesn't get its hands on the cash, it will run out of money at the end of the month.

According to the FT, Thomsen said data by the IMF has suggested Greece will run a primary budget deficit of as much as 1.5 per cent of GDP this year - significantly lower than the three per cent surplus it is supposed to hit under its bailout targets. That, he said, will cause Greece's debt levels to spike, meaning its government will be forced to either take drastic austerity measures or ask its eurozone lenders to agree to debt write-offs.

Greek negotiators will today meet European Central Bank (ECB) chief Mario Draghi. Greek deputy prime minister Yiannis Dragasakis will ask the ECB to lift restrictions on preventing his country from issuing more short-term debt.

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