News Archive

Lufthansa eyes Eurowings as platform for consolidation

FRANKFURT (This version of the story was refiled to correct spelling of Dolomiti in paragraph 1)

Lufthansa (LHAG.DE) said it wants to use its expanded low-cost brand Eurowings as a platform for European consolidation, and it could potentially take in other Lufthansa units or part-owned stakes such as Brussels Airlines and Air Dolomiti.

The first plane with the new Eurowings branding, aimed at price-sensitive leisure tourists, will take off from Cologne to the Dominican Republic in November. From Jan. 1, it will replace the Germanwings brand.

Lufthansa Chief Executive Carsten Spohr said Europe’s airlines needed to consolidate. Lufthansa wants to be a part of that process and sees Eurowings as the ideal platform, he said.

Eurowings is Lufthansa’s answer to low-cost carriers such as Ryanair (RYA.I) and easyJet (EZJ.L). It will have an Austrian operating licence and is not bound by the group collective labour agreements at its Lufthansa and Germanwings brands.

Lufthansa owns a 45 percent stake in Brussels Airlines and had agreed that this would only be a first step towards a full takeover. Spohr said however it was not yet clear if and when a complete takeover would happen.

The airline also added it will keep its investment budget to 2.5 billion euros ($2.8 billion) a year until 2020.

Separately, Lufthansa and cabin crew union UFO are holding talks on whether to resume negotiations over pay and pensions in a bid to stave off what could be imminent strikes over the busy summer holiday season.

(Reporting by Victoria Bryan and Peter Maushagen; Editing by Arno Schuetze and David Evans)

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German prosecutor launches new rate inquiry at Deutsche Bank: FT

FRANKFURT German prosecutors have launched preliminary inquiries into the roles individuals may have played in connection with Deutsche Bank’s participation in the interest rate-rigging scandal, the Financial Times reported online on Monday.

Earlier this month, a source told Reuters that Germany’s financial watchdog Bafin had heavily criticized Deutsche Bank in its report investigating attempts to manipulate inter-bank interest rates such as Libor.

The German regulator has been investigating Deutsche Bank and the role it played during the financial crisis when a global inter-bank lending rate mechanism was being manipulated.

Now the Frankfurt prosecutor has opened a new line of inquiry after the report, which was highly critical of management’s behavior during the rate-rigging attempts, according to the FT.

Neither the bank nor the prosecutor were immediately available to comment.

Any new investigation would deepen Deutsche’s legal difficulties and complicate the task incoming chief executive John Cryan faces in turning around the bank when he takes office for the first time on Wednesday.

Cryan was named new CEO after the bank’s two current chief executives quit in June following a string of regulatory run-ins, failed performance promises and a shareholder vote of no confidence.

The newspaper quoted Nadja Niesen, a senior prosecutor, as saying that a preliminary investigation had been opened.

“Those suspected are all represented by lawyers and are also aware of the process. How things proceed depends on the evaluation of the Bafin report, which has only recently been received,” Niesen was quoted as saying.

Deutsche Bank said on Friday, “The BaFin report confirms our findings that no present or former member of Deutsche Bank’s Management Board or Group Executive Committee instructed employees to manipulate intra-bank offered rates (IBOR) submissions or was aware of any attempted manipulations prior to June 2011 when certain misconduct first came to light during the Bank’s investigation of this matter.”

Bafin was not immediately available to comment.

(Reporting by Thomas Atkins and Kathrin Jones; Editing by Mark Heinrich)

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U.S. repo rate rises on Greece debt jitters

NEW YORK The borrowing cost on a key source of overnight loans for Wall Street rose on Monday as a breakdown in talks between Greece and its creditors caused a mad dash for cash to fund trades in advance of the end of the second quarter.

The impasse between Athens, and European officials and international lenders nearly sealed the chance the Greek government would miss its $1.77 billion repayment to the International Monetary Fund on Tuesday.

Such a move has raised concerns it would hasten the debt-laden nation’s exit from the euro zone economic bloc, which some traders fear would roil financial markets worldwide.

Greece’s debt mess has complicated the typical quarter-end move among banks and dealers to fund their balance sheets and money market funds and other investors to conserve cash to meet reporting and regulatory requirements.

In anticipation that Greece’s problems won’t be resolved anytime soon, some banks and dealers locked down longer-term financing earlier than usual in the $5 trillion repurchase agreement market, where they pledge Treasuries and other securities as collateral in exchange for cash from investors, analysts said.

“There’s definitely a scramble. It’s all dependent on Greece,” said Gennadiy Goldberg, interest rate strategist at TD Securities in New York. Still, he said, the rise in the overnight repo rate was not as acute as what was seen toward the end of the first quarter. “A lot of people tried to lock in as much funding as possible.”

The interest rate on overnight repos was last quoted as high as 0.20 percent before easing to 0.15 to 0.18 percent. It ended at a five-week low of 0.07 percent on Friday, according to ICAP.

On March 31, overnight repos were bid up to 0.58 percent, the highest since November 2008, during the global credit crisis, ICAP data showed.

Longer-term repo rates hovered at their highest level in more than two-and-a-half years. One-month repo rates were quoted at 0.25 to 0.29 percent on Monday, little changed from Friday.

After Greece shut banks for the week and imposed capital control, investors sought safety in Treasury bills and term reverse repurchase agreements from the Federal Reserve.

On Monday, the U.S. central bank awarded $100 billion of two-day reverse purchases at an interest rate of 0.07 percent to 72 bidders.

Interest rates on Treasury bills going out to early August remained in negative territory, as investors were willing pay a premium to own these ultra short-dated government securities.

Demand at Monday’s three-month and six-month bill auctions 912796GG8= nZXN0DHL01=, however, was the weakest in three months.

In the futures market, some short-term interest rates futures rose to contract highs FFU5 FFZ5, suggesting a revived view the Fed may not raise rates this year.

(Reporting by Richard Leong Editing by W Simon)

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Exclusive: ECB rejects bumper Greek plea but existing support to stay

ATHENS/FRANKFURT The European Central Bank rejected Greece’s request for 6 billion euros of extra emergency funds on Sunday, but is expected to continue limited support for Greek banks until the July 5 referendum, people with knowledge of the matter said.

The size of the request underscores the scale of the panic gripping Greek savers, and would have left the ECB in little doubt about the dramatic consequences of rejecting it.

However, the prospect that existing central bank funding will not be withdrawn offers hope that some banks will briefly open their doors, for example to pay pensions.

Greeks had rushed to withdraw their money after Prime Minister Alexis Tsipras on Saturday promised a snap vote next Sunday on the stringent terms demanded by creditors in return for cash to prevent Greece defaulting on its debts.

The Bank of Greece in turn asked the ECB’s policy-setting Governing Council to approve a top-up to an 89-billion-euro emergency credit line on Sunday, to cover the shortfall.

“The request by the Bank of Greece was for 6 billion euros of ELA (Emergency Liquidity Assistance),” said one of the people with knowledge of the talks. “The recommendation submitted to the ECB was signed by the governor (of the Bank of Greece).”

The ECB, which had been steadily increasing the amount of funding available to the banks, froze it on Sunday, meaning banks were unable to open and forcing Tsipras to impose capital controls to stop withdrawals.

As a small concession, however, Greece is expected to be able to continue tapping what remains of the emergency funding support already allocated, keeping the banks just above water.

Although a formal proposal has yet to be made and the situation is fast-moving, people who spoke to Reuters said they now expected euro zone central bank chiefs and ECB President Mario Draghi to keep the remaining support open at the current level when they meet on Wednesday.

Capital controls have stopped panicked savers from withdrawing large sums of money, which means that the current level of emergency liquidity, used to cover those payouts, could be enough to see Greek banks through the week.


A Greek government official said banks were expected to open 850 branches for the payment of pensions on Thursday, a step for which continued ECB support would be necessary.

Such backing could also help them to increase a current daily withdrawal limit of 60 euros at cash machines, said the official.

Commenting on the expected continuation of emergency funding, albeit only at its current level, one source said: “It doesn’t make sense to stop it now. The banks aren’t able to pay it back anyway. So if you froze it for another two or three days, it wouldn’t make any difference.

“With the referendum, you then have some sort of indication as to how things will go forward.”

Were Athens to default on payment to the International Monetary Fund, it would make it harder to justify such support because it would call into question the solvency of Greek banks, a condition of the funding.

Greek banks are closely intertwined with the state and count tax credits from the government as part of their capital cushion. Were the government to default, those would be worthless.

But the ECB, reluctant to be blamed for triggering a Greek financial collapse and risking its ultimate departure from the euro zone, may choose to ignore this, at least initially.

The expiry of Greece’s bailout program on Tuesday would not necessarily bar it from getting such funding for its banks. Both Ireland and Cyprus benefited from such emergency funding before they were in a bailout program.

Continued support of Greece’s banks is likely to run into opposition from Germany’s influential Bundesbank. German Finance Minister Wolfgang Schaeuble is also known to be skeptical.

The Bundesbank’s chief, Jens Weidmann, has long been critical of such credit, believing that it amounts to the ECB bankrolling Greece.

He fears other countries could be left to pick up the bill if Athens tumbles out of the 19-country currency bloc.

(Additional reporting by Lefteris Papadimas in Athens; editing by Anna Willard)

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Greece in shock as banks shut after snap referendum call

ATHENS Greeks struggled to adjust to shuttered banks, closed cash machines and a climate of rumours and conspiracy theories on Monday as a breakdown in talks between Athens and its creditors plunged the country deep into crisis.

Prime Minister Alexis Tsipras, who blindsided creditors by calling a referendum on the austerity cuts in the aid package proposed by the creditors, appeared on television on Sunday night to announce capital controls to prevent banks from collapsing.

Their imposition capped a dramatic weekend for Greece that has pushed the country towards a likely default on 1.6 billion euros ($1.77 billion) of International Monetary Fund loans on Tuesday and closer to an exit from the euro currency bloc.

French President Francois Hollande appealed to Tsipras to return to the negotiating table and German Chancellor Angela Merkel said she was willing to talk to the 40-year-old Greek leader if he wanted.

“There are a few hours before the negotiation is closed for good,” Hollande said after a cabinet meeting on Greece.

But with Greece’s bailout programme expiring in less than 48 hours, hopes of a last-minute breakthrough were fading fast. Greeks – used to lengthy talks with creditors before a eleventh-hour deal materializes – were left stunned.

“I can’t believe it,” said Athens resident Evgenia Gekou, 50, on her way to work. “I keep thinking we will wake up tomorrow and everything will be OK. I’m trying hard not to worry.”

European officials sent confusing signals about their next move. A spokesman for the European Commission told French radio that Brussels would not make any new proposals on Monday, appearing to contradict comments by EU Economics Commissioner Pierre Moscovici. He said a new offer was forthcoming and that the two sides were “only a few centimetres” away from a deal.

European bank shares fell sharply on Monday. Top banks in Spain, France and Germany were down more than 6 percent as the risk of a spillover to banks in other peripheral euro zone countries spooked investors.

The Greek government will keep banks shut at least until after July 5, the date of the referendum, and withdrawals from automated teller machines were limited to 60 euros a day when they reopened at midday. The stock exchange will also stay shut.

After months of talks, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’s shoulders.

The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

As Tsipras announced the emergency measures late on Sunday, there were long queues outside ATMs and petrol stations as people raced to take out cash before it was too late. Lines of over a dozen people formed at ATMs when they reopened on Monday.

“I’ve got five euros in my pocket, I thought I would try my luck here for some money. The queues in my neighbourhood were too long yesterday,” said plumber Yannis Kalaizakis, 58, outside an empty cash machine in central Athens on Monday.

“I don’t know what else to say. It’s a mess.”


Newspapers splashed pictures of long lines outside cash machines on their front page. The Nafetemporiki daily headlined Monday’s edition “Dramatic hours” while the Ta Nea daily simply said: “When will the banks open”.

The conservative-leaning Eleftheros Typos newspaper accused Tsipras of announcing the referendum as a ruse to tip the country into early elections in the hopes of winning them.

“Mr Tsipras’s decision to call a referendum and a possible euro exit constitutes a premeditated crime,” it said in an editorial. “It is clear that Mr Tsipras has lost the trust of citizens. That’s obvious from the queues at ATMs and petrol stations, and it will become obvious at next Sunday’s ballot.”

As rumours flew about, dozens of pensioners queued outside at least two offices of the National Bank of Greece (NBGr.AT) on Monday after hearing they could withdraw pensions from some branches. They were turned away, Reuters photographers said.

“I’ve worked all my life, only to wake up one morning to a disaster like this,” said one shop owner, who was there to collect his wife’s pension.

Despite the financial shock, parts of daily life went on as normal, with shops, pharmacies and supermarkets in the city opening and Greeks meeting to discuss their country’s fate at cafes and restaurants. Tourists gathered as usual to watch the changing of the presidential guard outside parliament.

A rally called by Tsipras’s Syriza party to protest against austerity measures and urge voters to say “No” in the referendum on bailout terms is expected later on Monday.

Officials around Europe and the United States made a frantic round of calls and organised meetings to try to salvage the situation.

U.S. President Barack Obama called Merkel, and senior U.S. officials including Treasury Secretary Jack Lew, who spoke to Tsipras, urged Europe and the IMF to come up with a plan to hold the single currency together and keep Greece in the euro zone.

“While the programme is active until Tuesday, they aren’t providing the necessary liquidity for Greek banks just to blackmail and to terrorize us,” Administrative Reforms Minister George Katrougalos told Antenna television.

“If we vote a yes, they will demolish pensions, you will have to pay for medicare in public hospitals. When your kids can’t go to school you will say ‘thanks’ and they will say ‘you asked for it’.

“But if you say no you have the ability to fight for a better future.”

(Additional reporting by Deepa Babington, Lefteris Karagiannopoulos, Yannis Behrakis and Alkis Konstantinidis; Writing by Matthias Williams and Deepa Babington; Editing by Anna Willard)

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Wall Street set to open lower as Greek crisis worsens

U.S. stock index futures fell around 1 percent in heavy trading on Monday after Greek bailout talks broke down, intensifying fears that it could be the first country to exit the euro zone.

Markets around the world fell on fears the problem could spread to other European countries. The blue-chip Euro STOXX 50 index .STOXX50E towards its biggest one-day percentage loss since late 2011.

The European Central Bank froze funding to Greek banks, forcing Athens to shut banks for a week to keep them from collapsing.

“What the Greek government is doing is almost unprecedented for developed nations,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“I don’t remember anytime in recent history where a developed nation literally shut down its banking system for an entire week.”

Greece faces default if it does not repay 1.6 billion euros ($1.8 billion) to the International Monetary Fund on Tuesday.

Default would send Greece sliding towards a euro exit and challenge Europe’s grand project to bind its nations into an unbreakable union with a common currency.

Adding to the uncertainty, Chinese stocks closed sharply lower after a volatile day of trading despite surprise monetary easing by the central bank.

U.S. investors also await May data for pending home sales from the National Association of Realtors, which is expected to have dropped 1.2 percent after rising 3.4 percent in April. The data is expected to be released at 10 a.m. ET (1400 GMT).

The Federal Reserve Bank of Dallas will issue manufacturing outlook survey for June at 10:30 ET (1430 GMT).

Investors have been keeping a keen eye on data to see if the U.S. economy has recovered from a slow start at the beginning of the year. The Federal Reserve has said it will raise rates when it sees a sustained rebound in the economy.

A September interest rate hike is “very much in play” if the U.S. economy continues to strengthen, though the Federal Reserve could also wait until December to start tightening policy, New York Fed President William Dudley told the Financial Times in an interview.

SP 500 e-minis ESc1 were down 22.5 points, or 1.07 percent, with 399,460 contracts traded – twice the average volume at this time of the day.

Nasdaq 100 e-minis NQc1 were down 56.25 points, or 1.26 percent, on volume of 47,304 contracts. Dow e-minis 1YMc1 were down 186 points, or 1.04 percent, with 46,328 contracts changing hands.

Sysco (SYY.N) shares rose 2 percent to $38.99 in premarket trading after the largest U.S. food distributor said it terminated its merger with privately held U.S. Foods [USFOO.UL].

Seres Therapeutics (MCRB.O) fell 10.5 percent to $46 after an 86 percent rise in its market debut on Friday.

Aratana Therapeutics (PETX.O) rose 15 percent to $15.50 after the animal health drugmaker said its experimental appetite-stimulating drug was found effective in dogs in a pivotal study.

Insurer Assured Guaranty (AGO.N) fell 19.7 percent to $22.00 on Monday after BTIG downgraded the stock on concerns over Peurto Rico’s debts.

(Additional reporting by Siddharth Cavale in Bengaluru; Editing by Saumyadeb Chakrabarty)

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European banks, bonds shaken by Greek turmoil

LONDON Europe’s financial markets were jolted on Monday by the collapse of talks and imposition of capital controls in Greece, although initial heavy selling eased as investors judged there was still some way to run for the saga.

Banks and bond market borrowing costs for Italy, Spain and Portugal bore the brunt of markets’ fright that Prime Minister Alexis Tsipras’ calling of a referendum on further austerity demanded by euro zone creditors would see Greece leave the euro.

After an initial wave of selling, however, most markets recovered some ground. The one-day moves were large but looked pale in comparison to the events of 2008 or the last major round of Greek-spurred turmoil in 2011-12.

Wall Street was set to open around 1 percent lower while the FTSE Eurofirst blue chip index was down by just over 2 percent overall.

“The European financial system now has much less exposure to Greece than in 2011 and 2012,” said Stephanie Flanders, Chief Market Strategist for Europe at JP Morgan Asset Management.

“It is also better equipped to deal with contagion to other countries — and so are the countries themselves.”

Greece’s banks and stock market were closed on Monday and were expected to remain so until after the July 5 snap referendum called by Greek Prime Minister Alexis Tsipras on austerity demanded by euro zone partners.

That didn’t stop investors from selling other related assets. The Global X FTSE Greece exchange-traded fund (ETF), a buyable security which tracks the Athens stock market, was down around 15 percent from its Friday closing price. Euro zone banks fell 5 percent in value, with the worst falls for Portuguese, Spanish and Italian lenders.

Adding to the gloomy backdrop, China shares dived another 3.3 percent, bringing the losses in the past two weeks to 22 percent, with central bank cuts in interest and reserve rates on Saturday failing to calm jittery investors. [.SS]


The worst fall in shares for six months and the 30 basis point rise in yields for other southern euro zone governments was the start of an acid test of policymakers’ hopes that, if Greece does depart from the euro, the rest of Europe is isolated from the fallout.

By mid-morning in Europe, there were a number of voices arguing that the sell-off represented an opportunity to buy shares cheaply in markets into which the European Central Bank will pump billions of extra euros over the next year.

“I think Greece will vote to remain in the euro, and the market seems to agree with me,” said Lex van Dam, a hedge fund manager at Hampstead Capital. “I was a buyer on the initial dip this morning in both the euro as well as the European stock markets, and continue to remain constructive.”

The euro itself proved resilient, recovering much of a roughly 2 percent initial fall to trade just half a percent lower at $1.1102, well within the past month’s ranges.

It was helped by Switzerland’s National Bank confirming it had intervened to counter gains for the franc and by a fall in U.S. Treasury yields that reflected speculation the Federal Reserve would hold off for longer in raising interest rates if the trouble in Europe worsens.

“Fed/ECB divergence bets have been partially wiped off as a result of rising Grexit risk (and) less favorable USD rate differentials slow dollar strength down,” said Stephen Gallo, head of European FX Strategy with BMO in London.

(Additional reporting by John Geddie, Anirban Nag, Jemima Kelly and Sudip Kar-Gupta in London, Nicola Saminather in Singapore and Hideyuki Sano in Tokyo; Editing by Andrew Heavens)

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Western Union to close in Greece for rest of week

LONDON Western Union (WU.N), the world’s largest money transfer company, said it was closed for business in Greece on Monday and would remain closed for at least the rest of the week.

Western Union said it had not seen a significant increase in customers moving money out of Greece in the two months to June 27 but had seen a rise in funds being moved into the country.

“Our inbound business is seeing an upswing and we will continue to monitor this closely as and when our business in Greece is operational once gain,” the company said in a statement emailed to Reuters on Monday.

(Reporting by Matt Scuffham, editing by Sinead Cruise)

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China finance minister: confident AIIB can start functioning before year end

BEIJING China’s Finance Minister Lou Jiwei said on Monday he was confident the Asian Infrastructure Investment Bank (AIIB) could start functioning before the end of the year.

Lou was speaking at a ceremony in Beijing at which delegates from 57 countries will sign articles of agreement on the founding of the China-backed AIIB.

(Reporting by Koh Gui Qing; Writing by John Ruwitch; Editing by Shri Navaratnam)

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