London, England - A Greek proposal to extend its bailout and not to undermine agreed fiscal targets has lifted European stocks to seven-year highs and cut government borrowing costs across the euro zone, even though Germany has rejected it.
Despite the German rejection, the wording of Greece's proposal on Thursday appeared to go substantially toward the position taken by euro zone finance ministers in early negotiations, reassuring investors a deal was not far away.
Ten-year bond yields in Spain, Italy and Portugal - the countries most vulnerable to the Greek crisis - fell 5-7 basis points to 1.54 percent, 1.56 percent and 2.27 percent, respectively.
They were little changed after a German finance ministry spokesperson said the proposal did not correspond to criteria agreed by the Eurogroup on Monday.
‘DEFINITIVE AGREEMENT SOON’
The broader FTSEurofirst 300 index was up a touch at 1516.30 after reaching a seven-year high of 1517.98 points when the Greek proposal was reported and a low of 1504.03 before that. United States stock market futures were steady.
Rabobank rate strategist Lyn Graham Taylor said: “We should now get a definitive agreement soon.”
Greece's main stock market index rose 1.1 percent and banking stocks rose 5.8 percent. Greek 10-year bond yields fell 38 basis points to 10.05 percent.
The Greek request for a six-month extension to its euro zone loan agreement came as it was weeks away from running out of cash. Crucially, Greece agreed the extension would be monitored by the EU Commission, European Central Bank and International Monetary Fund - a retreat by prime minister Alexis Tsipras, who had vowed to end cooperation with ‘troika’ inspectors.
Reuters