European shares rise despite ongoing worries over Greek bailout package

EUROPEAN shares rose on yesterday, as upbeat US data boosted hopes of an economic recovery, although doubts persisted on Greece’s ability to implement the tough austerity measures it has agreed to under a $147bn (£96bn) bailout deal.

The FTSEurofirst 300 index of leading European shares closed 0.2 per cent higher at 1,064.56 points -- after losing 2.7 per cent last week -- its third straight week of declines.

Investor confidence was lifted by data showing growth in US manufacturing, construction and consumer spending, reinforcing the view that an economic recovery is under way in the world’s largest economy. Among the risers, GDF Suez added 1.9 per cent after it stuck to its earnings goals despite a drop in first-quarter core profit, according to documents released ahead of the utility’s shareholder meeting yesterday.

European finance ministers agreed the record €110 billion-euro (£95bn) bailout for Greece on Sunday, with Athens set to carry out spending cuts and tax hikes worth €30bn over three years, on top of belt-tightening measures already taken. The emergency aid, the most ever for a country, alleviated some fears of a near-term sovereign debt default, but the package still has to obtain parliamentary approvals and left open the question of which fiscally vulnerable country in Europe might be next.

“I have doubts if Greece is ever going to succeed in paying back the money. But having said that, the bailout package is very good for short-term relief and people appear to be quite happy with that outcome,” said Heino Ruland, strategist at Ruland Research in Frankfurt.

Banking stocks were mixed, with BNP Paribas, Deutsche Bank and UBS up 0.3 to one per cent, while Banco Santander, BBVA and Banco Espirito Santo lost 0.7 to 2.8 per cent.

Greek banks shed 1.3 per cent in choppy trade despite the European Central Bank announcing its acceptance of all Greek government bonds as security for loans, even if their credit rating continues to fall.