European shares rose yesterday after it was announced that the eurozone leaders were working closely with the International Monetary Fund (IMF) to negotiate a solution once and for all to the sovereign debt crisis. The hopes came after discussions occurred at G20 and at IMF meetings over the weekend.
Ideas For Solutions
Ideas included a 50% write-down of some of the Greek government debts. The IMF, European Central Bank, and European Commission, collectively known as the Troika, will be further discussing the state of Greece’s economy at some point this week.
The Dax index in Germany was up by 3%, the FTSE 100 was up by 2%, and the Cac in France rose by 1.8%. This shows optimism in the markets, with investors hoping that the eurozone will reach an agreement. This hope is present despite the fact that officials have said they had agreed no plan as of yet.
Investors are focusing on what they hear is proposed at the meetings, which is unconfirmed. In addition to the potential write-down of Greek debt, ideas have reportedly included strengthening European banks in order to absorb costs, especially where they could be affected by defaults on national debts. Alternatively, the European Financial Stability Facility, or the bailout money for the eurozone could be increased.
German Finance Minister, Wolfgang Schaeub expressed doubts about the effectiveness of this last plan on Monday night.
Stocks in banking rose the most, with France’s BNP Paribas gaining 7.7%. Commerzbank in Germany rose 5.7% and the Royal Bank of Scotland (RBS) in the UK increased 5.2%.
The German Chancellor Angela Merkel held a meeting with the Greek Prime Minister Geogre Papandreou to discuss the progress in cutting the deficit with Greece’s austerity measures. This latest meeting came while officials attempted to make decisions on releasing the latest Greek bailout funds.
The European Central Bank, the European Commission, and the International Monetary fund will review this progress in Athens later this week. They will decide together if they should release the bailout funds needed by the country’s government in order to pay its bills and avoid a default on its debts.