Hint of Greek compromise pushes FTSE through 6000

31st May 2011

The story is complicated but it appears that the IMF, the European Central Bank and some Eurozone countries notably Germany may have found a way to support Greece in the short term, while also putting off a more fundamental agreement on its debts.

One part of the stand-off has been a German demand that bondholders share some of the pain of any further restructure with Greece expecting a shortfall of around euro 30bn each year for 2011 and 2012 despite the recent euro 110bn bailout.

The European Central Bank won't get involved if bondholders suffer while the IMF was refusing to get involved if there was no clarity on Greece's funding in 2012.

The following would appear to be the key paragraph from the newspaper's report.

"IMF officials have hinted they are flexible about the assurances they are seeking, which might allow Europe to keep the IMF happy with an interim commitment to Greece while buying time for Germany and the ECB to resolve their dispute later."

Yahoo Finance says that apart from Greece, the UK market moved up as miners made gains and broker Nomura issued a positive note on Europe's banks.

However the chief executive of investment bank Blackrock's Larry Fink may be losing patience with all these debates and short term compromises. In an interview with Bloomberg, he argues that Europe must now sort out its banks, particularly vulnerable smaller banks. He argues the eurozone needs to set up an equivalent of the US TARP scheme, where the US government bought assets from its banks.

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