(AP) LONDON - Financial markets steadied Friday on hopes that Spain was preparing to tap a new European aid program, a day after uncertainty about the fragile global economy dented investor sentiment.
Over recent weeks, markets have been buoyed by new measures to deal with Europe's debt crisis and hopes that central banks would offer new economic stimulus. Now that major central banks have provided the stimulus, investors are focused on the deteriorating global economy. Figures this week have mostly pointed to lower growth.
On Thursday, further signs emerged of worsening conditions in Europe, Japan and China, leading to a retreat for stocks, as well as the euro and oil prices.
Though those concerns remain, investor optimism was shored up Friday by hopes that Spain was negotiating with its partners in the eurozone on a new economic reform program. Experts see the reforms as the groundwork for Madrid to request financial aid from Europe's bailout fund and central bank.
The ECB recently announced a bond-buying program meant to bring down the borrowing rates of countries that ask for financial aid. The plan has eased market tensions in Spain, but mainly on the assumption that Madrid will request the aid - something it has so far balked at doing.
"Spanish Prime Minister Mariano Rajoy has attempted to delay making the decision for weeks now, however it appears the recent pressure from other European leaders has forced him into negotiations," said Craig Erlam, market analyst at Alpari.
In Europe, the FTSE 100 index of leading British shares was down 0.2 percent at 5,843 while Germany's DAX rose an equivalent rate to 7,403. The CAC-40 in France was flat at 3,509 but Madrid's main IBEX index rose 0.5 percent to 8,059.
Wall Street was poised for modest gains at the open, with both Dow futures and the broader S&P 500 futures up 0.2 percent.
The euro has also recovered its poise in light of the Spanish hopes, trading 0.3 percent higher at $1.3011. Oil prices, which have also been under selling pressure in recent days, also recouped some losses, with the benchmark New York rate up 65 cents to $93.07 a barrel.
Earlier in Asia, Tokyo's Nikkei 225 index, gained 0.2 percent to 9,110.0 while China's benchmark Shanghai Composite Index added 0.1 percent to 2,026.69. Hong Kong's Hang Seng rose 0.7 percent to 20,734.94.
(AP) ATHENS, Greece - Greece's coalition government parties on Thursday failed again to agree on a major new austerity package that had been promised for this week and is crucial to the financial survival of the country.
Prime Minister Antonis Samaras resumed meetings with the leaders of parties backing his coalition government to discuss the package worth at least 11.5 billion euro ($15 billion).
Politicians have had trouble agreeing on the details of the package, which is expected to include more salary and pension cuts for the years 2013-14. Critics say it's just going to make the recession worse and make it more difficult for Greece to pay down its debts.
"Nothing has been finalized. All those who hastened to declare that the measures have been decided were mistaken,'' junior coalition partner Fotis Kouvelis told reporters after talks with conservative Samaras and a Socialist party leader.
Finance Minister Yannis Stournaras confirmed the three-party talks had again failed to reach a final deal, describing the negotiations as "very difficult.''
Asked when he thought the agreement would be reached, he replied: "I don't know. I think it will take a few more days."
The new cuts are a source of indignation among many Greeks, including judges and police.
Earlier on Thursday, policemen guarding the prime minister's office in central Athens used pepper spray to push back about 20 demonstrating colleagues, who held up a banner that read "Protect those who protect you." No arrests were reported by authorities.
"We staged a small protest together with colleagues from the Coast Guard and the Fire Service. We wanted to hand over a petition to the government," Grigoris Bakaris, a senior member of the Greek Police Officers' Association who joined the protest, told the AP.
"There was an argument I wouldn't call it a scuffle, but an argument and that was a very limited use of chemicals (pepper spray) and the incident ended there. We later were allowed to hand in our petition."
Authorities responded to the protest by padlocking entrances to a public park near the prime minister's office, leaving more than 20 tourists stranded inside for over an hour.
Elsewhere in in the capital, public transport workers staged a 24-hour strike, halting subway and tram services.
Judges and doctors at public hospitals also began protests this week, turning away most cases in a slow-down strike, while tax workers are to strike Friday.
Athenian Stelios Noussas drove to work because of the subway strike, but said he supported the protest.
"They're striking for their rights. We're all in the same boat," he said. "If we don't have strikes how will we pursue our rights? Good for them."
(AP) MADRID - Spain raised 4.8 billion euro ($6.2 billion) in a debt auction Thursday that saw strong demand and a substantial drop in its borrowing costs. But analysts and investors warned that Prime Minister Mariano Rajoy should not take the successful sale as a sign that the pressure to seek a rescue package was over.
"Its purely a cosmetic image....nothing has changed," said Ramon Zarate of Madrid's Emasl financial consulting group.
After the European Central Bank pledged two weeks ago to buy unlimited amounts of government bonds to help countries that are being strangled by their debts, Spanish borrowing costs have fallen sharply. Investors have grown more confident that, thanks to the ECB program, the Spanish government could continue to pay its bills.
Thursday's successful auction of medium- and long-term bonds reflects this new confidence. The Treasury sold 859 million euro in benchmark 10-year bonds at an average rate of 5.67 percent, down from 6.65 percent in the last such auction Aug. 2. Demand was 2.8 times the amount offered. It sold another 3.94 billion euro in three-year bonds at a rate of 3.84 percent, up from 3.6 percent. The total raised was 300 million euro more than planned.
However, the ECB plan, along with financial aid from Europe's bailout funds, comes with strings attached and Madrid has said it may apply for the aid if the terms are reasonable.
Analysts say that if Spain doesn't request a bailout soon, it is only a matter of time before its borrowing costs rise to unhealthy levels again.
Emasl's Zarate warned that that investor patience was likely to dry up fast in October if Spain does not act soon.
"The next thing should be for Spain to ask for the bailout and take the volatility out of the market," he said. "It's playing with fire."
Analysts and investors suspect the government is dawdling on the issue because it is afraid that a bailout will hurt the ruling Popular Party's chances in regional elections in Galicia and the Basque region next month.
Zarate added that the interest rate charged in the Thursday's auction merely reflected what was being demanded on the secondary market following the ECB announcement, adding that the amount sold was "ridiculously low," which indicated a lack of investor interest.
Craig Erlam, a market analyst for London-based Alpari UK ,said the lower benchmark rate showed "confidence in Spain to pull through this is higher than expected."
But he added that the "result is only going to convince (Spanish premier) Mariano Rajoy that he is in no rush to request aid from the European Union, and therefore accept their bailout conditions."
He pointed out that Spain had now auctioned more than 82 percent of its intended debt issuance for the year.
"Time is very much on Spain's side, for now," he said in a note.
Spain's battle to regain investor trust in its government finances has had tough consequences for households and businesses.
The economic crisis has left the country with near 25 percent unemployment and austerity measures and reforms aimed at reining in debt have triggered street protests and sparked some regional tensions.
Thursday's bond sale came as Catalonia regional government president Artur Mas met conservative Spanish Prime Minister Mariano Rajoy for talks on his demand for greater fiscal powers so that his powerful northeastern region can better manage its debt and deficit burdens.
The talks are the first since Mas led a massive rally in Barcelona last week that was seen as a show of strength for the region's pro-independence camp and a warning to Madrid.
Rajoy is opposed to both extra fiscal powers for the region as well as the idea of any of the 17 regions breaking away from the Spanish state.
Speaking after the meeting, Mas said the meeting "did not go well" and there was no sign that the central government was prepared to change its position. He said Catalonia would review the situation and study its options in a Parliament debate next week.
He said "an historic opportunity had been lost" in furthering understanding and cooperation between Catalonia and Spain.
Catalonia is Spain's most economically powerful region but also the one most in debt; it has asked for 5.02 billion euro from a central government fund.
News reports had said that if denied extra fiscal powers Mas would call early regional elections that could turn into a referendum on independence and cause further problems for the central government. But Mas said Thursday such decisions would have to be taken at another time.
(AP) LONDON - Global markets mostly fell Tuesday as investors worried about the global growth outlook and Spain's apparent delay in accepting a financial aid package.
Spain's markets have improved in recent weeks on expectations that the government will get some form of rescue loan from the 16 other eurozone countries. But Madrid has not made any formal request yet, likely wary of the policy conditions that would come attached.
The delay pushed the country's bond yields sharply higher on Monday, suggesting an increase in investor concern about the government's finances. The yields eased back somewhat on Tuesday after a bond auction was well-received. The sale of 12- and 18-month debt saw strong demand and resulted in lower interest rates than in the previous such auctions.
The auction result helped markets, but tensions remain high by midmorning in Europe, Spain's main stock index was still down 1.7 percent.
"Investors appear to be turning nervous," said Kintai Cheung, analyst at Credit Agricole CIB.
Elsewhere, Britain's FTSE 100 was down 0.6 percent to 5,855.69 and Germany's DAX shed 1.0 percent to 7,326.45. France's CAC-40 lost 1.2 percent to 3,511.36.
Wall Street headed for a lower opening, with Dow Jones industrial futures slipping 0.2 percent to 13,438 and S&P 500 futures losing 0.2 percent to 1,450.70. Asian indexes closed mostly lower.
Analysts say the stock losses are also a pull-back from highs hit last week, when the U.S. Federal Reserve triggered a market rally with the announcement of new stimulus measures. Faced with a struggling recovery in the world's biggest economy, the Fed announced plans to buy $40 billion of mortgage bonds a month for as long as necessary as part of a strategy to boost borrowing and spending. The Fed also extended its pledge to keep short-term interest rates low until 2015, a year longer than its previous target.
The size of the program buoyed confidence in the global economy, and stocks rallied. Since then, however, investors have begun to re-examine the big picture and to see substantial headwinds on the horizon.
"I think the outlook in the near term for the global economy is still fairly negative," said Peter Elston, strategist at Aberdeen Asset Management in Singapore. "I suspect that further weakness is just around the corner, which might explain the greater than expected easing by the Fed."
Losses began earlier in the day in Asia. Japan's benchmark Nikkei 225 index fell 0.4 percent to 9,123.77. Hong Kong's Hang Seng lost 0.3 percent to 20,601.93 and Australia's S&P ASX/200 fell 0.2 percent to 4,394.70.
Benchmarks in Singapore, Indonesia and Taiwan also fell. Mainland China's Shanghai Composite Index fell 0.9 percent to 2,059.54 while the smaller Shenzhen Composite Index lost 0.6 percent to 859.44.
Bucking the trend was South Korea's Kospi, which gained 0.1 percent to 2,004.96.
Benchmark oil for October delivery was down 30 cents to $96.32 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.38, or 2.4 percent, to finish at $96.62 a barrel on the Nymex on Monday, when trading was marked by huge volatility.
In currencies, the euro fell slightly to $1.3074 from $1.3107. The dollar fell to 78.64 yen from 78.74 yen.
(AP) NICOSIA, Cyprus - Greece may be given some more breathing room to meet its bailout commitments but no more money, European finance ministers indicated Friday as they gathered in Cyprus for a top-level meeting.
Finance ministers from the 17 countries that use the euro, along with European Central Bank chief Mario Draghi and the International Monetary Fund's Christine Lagarde, are holding an informal meeting in the Cypriot capital of Nicosia in a period of relative calm.
An ECB bond-buying plan, the creation of a new government in Greece following two elections and a German court ruling in favor of Europe's new bailout fund have all calmed markets and politicians nervous at the eurozone's debt problems.
However, Europe's debt crisis is by no means over and a number of hurdles still need to be cleared if the current calm continues through to the end of the year.
Greece and its ability to stick to its bailout terms will be one of the main topics of discussion over the next two days. Spain will also be high on the agenda, and in particular whether the government will ask for financial help from the eurozone's bailout funds ECB, as will proposals for a new European banking union.
Speaking to reporters as he arrived at the meeting, Dutch finance minister Jan Kees de Jager said Greece does not have much flexibility as it tries to get more time to achieve the budget cuts and reform measures required by its rescue lenders.
"If the deficit turns out to be somewhat worse than expected because of a temporary downturn in the economy, there could be some time but not money, not extra money," de Jager said.
Debt-crippled Greece has depended since May 2010 on international rescue loans, granted by its European partners and the IMF, in return for a deeply unpopular austerity program.
The conservative-led Greek coalition government is seeking a two-year extension to meeting the budget reduction program to 2016, as the country's recession is proving worse than anticipated at the time the program was negotiated. By the end of this year, the Greek economy is expected to have contracted by a cumulative 20 percent since 2008.
If Greece's creditors do not approve the new cutbacks, the country will lose access to its vital rescue loans, potentially defaulting on its mountain of debt and forced to leave the 17-nation eurozone.
However, many observers think Greece should not be forced to leave the euro at a time when the 17 countries appear to be making progress in their efforts to solve the debt crisis.
Austria's finance minister Maria Fekter said the Greek government is making "ambitious" proposals to deal with its debts and echoed De Jager in saying that the country may get more time to get its finances in order.
"We will give Greece the time that they need for this," she said. "There will probably not be more money."
However several of Greece's euro partners are wary of giving the country more time because it could mean additional funding for the crisis-hit country.
Greek Prime Minister Antonis Samaras, who is currently struggling to get an agreement on an 11.5 billion euro ($14.7 billion) package of spending cuts for the coming two years with the two leaders of his coalition government, says no new money will be needed, arguing that Greece could raise more short-term money in the markets and rework its current spending plans.
He has been trying to convince leaders around Europe that Greece needs "time to breathe" so the country can return to growth that would make it easy to pay off debts.
Greece's last bailout package, worth around 130 billion euro, was agreed earlier this year but the money will only be handed over in the event it meets certain targets.
Spain, which also at the heart of Europe's debt crisis will also likely feature in the discussions through Saturday as it weighs up whether to tap a new European Central Bank bond-buying plan.
Luis de Guindos, Spain's finance minister, said the primary focus for the Spanish government remains getting its borrowing levels down. Spain is widely-expected to make a request to use the ECB facility at some stage but the conditions attached have yet to be determined.
"What Spain has to do is adjust its public deficit to the path we are committed to down from an excessive deficit," he said.
This is the first gathering of euro finance ministers since the ECB's Draghi announced the new plan to buy up unlimited amounts of short-term debt to help struggling countries lower their borrowing costs.
The ECB proposals have helped calm the mood in markets over the past few weeks, reducing the pressure on Spain to tap the new facility because it's borrowing rates in the markets have fallen dramatically.
"Spain is on the right track but will have to continue to convince the markets that it has sound policy for economic reform as well as budgetary austerity measures," De Jager said.
(AP) LONDON - Investors breathed another sigh of relief Wednesday, sending the euro above $1.29 for the first time in four months after Germany's highest court rejected calls to block Europe's permanent rescue fund, removing another uncertainty from Europe's efforts to solve its debt crisis.
Even though the decision by the Federal Constitutional Court comes with certain conditions, it means the country's president can sign off on the European Stability Mechanism and it can go into force by early next year.
The euro was the big beneficiary from the decision, climbing 0.5 percent on the day to a high of $1.2920, the first time it's been above the $1.29 threshold since May 14.
Stocks also got a boost, with Germany's DAX up 0.9 percent at 7,375 and the CAC-40 in France 0.7 percent higher at 3,562. The FTSE 100 index of leading British shares was 0.2 percent firmer, at 5805.
The fund is important because it can loan money to cash-strapped governments. It's also due to play a key role in the recent bond-buying plan unveiled by European Central Bank president Mario Draghi, the main reason behind the turnaround in market sentiment over Europe over the past few weeks.
"With the Germans now seemingly fully committed to the ESM, and the Draghi plan in force, hopes are high for an easing of the eurozone crisis," said Chris Beauchamp, market analyst at IG Index.
The borrowing rates of countries at the frontline of Europe's debt crisis eased further Wednesday, with the yield on Spain's 10-year bonds down 0.07 percentage points to 5.60 percent and Italy's falling 0.03 percentage points to 4.98 percent. Not long ago, both countries were seeing this key interest rate above 7 percent, widely-considered as unsustainable in the long-run.
Despite the positive reaction in the markets, investors think Europe is a long way from being fixed. Greece still has to convince creditors that it deserves more bailout money, while Spain appears undecided about whether to tap the ECB's bond-buying facility.
Also, there are real doubts that the ESM can do the job. The 500 billion euro available would not be enough in the event that Italy or Spain needed to be bailed out like Greece, Ireland and Portugal.
"In the event of a Spanish and Italian bailout, even with ESM ratification, the resources available fall short of what is required for such bailouts," said Neil MacKinnon, global macro strategist at VTB Capital.
The next big event on the horizon for markets will be Thursday's decision by the U.S. Federal Reserve on whether to back another monetary stimulus. Expectations that it will do so have risen lately following a run of soft economic data.
Many analysts remain skeptical that the Fed will do anything more than reassert that it's willing to do more, especially as a number of its policymakers may be reluctant to do something dramatic in the middle of the U.S. presidential campaign.
Wall Street was set for gains, with Dow futures and the broader S&P 500 futures up 0.5 percent.
Earlier in Asia, Japan's Nikkei 225 index rose 1.7 percent to close at 8,959.96. Hong Kong's Hang Seng added 1.1 percent to 20,075.39 and South Korea's Kospi gained 1.6 percent to 1,950.03. In mainland China, the Shanghai Composite Index gained 0.3 percent to 2,126.55. The Shenzhen Composite Index gained 0.5 percent to 901.29.
Oil prices edged higher, too, with benchmark crude for October delivery up 63 cents to $97.80 per barrel in electronic trading on the New York Mercantile Exchange.
(AP) KARLSRUHE, Germany - Germany's highest court paved the way for the creation of Europe's 500 billion euro rescue fund after it rejected Wednesday calls to block it.
Investors breathed a sigh of relief that Federal Constitutional Court removed the threat that Germany would be prevented from ratifying the treaty setting up the European Stability Mechanism - a new, permanent 500 billion euro fund for the 17 countries that use the euro and a central part of efforts to contain the debt crisis.
Stocks across Europe rallied strongly, the euro spiked to a four-month high of $1.2906 and the borrowing rates of troubled economies, such as Spain and Italy, eased further.
The court did, however, insist that Germany must secure legal guarantees that the Parliament must vote on any further increases in its contributions to the ESM. These guarantees must be secured before President Joachim Gauck signs the fund into law.
Opponents had challenged Germany's ratification of the ESM, arguing that it violated the country's constitution. They had sought an injunction preventing Gauck from signing the legislation into law.
They also had sought to block the so-called fiscal compact, the budget-discipline pact pushed by Chancellor Angela Merkel and signed by most European Union countries. That call was also rejected.
"This is a smart decision in the pro-European spirit of our constitution," Foreign Minister Guido Westerwelle said.
Jean-Claude Juncker, who leads meetings of the eurozone's finance ministers, said he plans to hold the first meeting of the ESM's board of governors on Oct. 8.
Germany's ratification of the ESM was key because without the country's participation the fund could not have worked. Germany, as Europe's biggest economy, is the No. 1 contributor the fund.
Germany is liable for about 27 percent - about 190 billion euro - to the overall European bailout scheme of 700 billion euro, which includes the ESM and remaining money from the current temporary fund, the European Financial Stability Facility.
The taxpayer-backed fund is crucial to the eurozone's debt crisis resolution efforts because it can loan money to governments that can't borrow otherwise, and markets had been nervously awaiting the ruling.
Federal Constitutional Court Chief Justice Andreas Vosskuhle said the case posed "special challenges" - not just because of the political significance of the ESM, but because the financial and political consequences of a possible delay were "almost impossible to estimate reliably."
The court still has to deliver a full ruling on the substance of the plaintiffs' complaints. But Vosskuhle made clear that his court's ruling on the calls for a temporary injunction - delivered after two months of deliberations - reflected the likely outcome of the case.
"The examination showed that the laws that have been challenged with high probability do not violate the constitution," he said.
Still, he said Germany must get legal guarantees before ratification that the provisions of the ESM can't be interpreted in such a way that Germany's financial liability could be increased without the approval of Berlin.
Germany must also ensure that provisions in the ESM treaty demanding "professional secrecy" from fund employees don't stand in the way of the German Parliament being informed in full about fund decisions.
"These provisions are above all intended to prevent a flow of information to unauthorized third parties, for instance to actors on the capital market, but not to the parliaments of the member states," the court said in its ruling.
Wednesday's ruling was in line with a string of previous rulings in which the Federal Constitutional Court has approved European political and financial integration, and eurozone rescue measures, while insisting that the German Parliament's right to have an early and thorough say on them be safeguarded.
Vosskuhle said it wasn't his court's job to decide on the "usefulness and sense" of measures approved by a large majority of German lawmakers.
"No one can say for sure what measures are actually the best for Germany and the future of our united Europe in the current crisis," he said. He insisted, however, that "only as a democratically legitimized community governed by the rule of law does Europe have a future."
It was not immediately clear when President Gauck would be able to sign the measure, which was approved by Parliament in June with cross-party support - and when the ESM, which originally was slated to open for business at the beginning of July, could start work.
Chancellor Angela Merkel was due to address lawmakers later Wednesday.
(AP) BERLIN - Germany's high court on Tuesday rejected a last-minute plea to postpone its ruling on a request to block the country's approval of the eurozone's permanent bailout fund.
The complaint was brought by Peter Gauweiler, a backbench lawmaker with Chancellor Angela Merkel's conservative bloc and a consistent opponent of the government's euro rescue strategy, after the European Central Bank last week unveiled a new program to buy government bonds.
Gauweiler is already one of several plaintiffs against the 500 billion euro ($640 billion) European Stability Mechanism. Germany's Federal Constitutional Court is to rule Wednesday on calls for an injunction.
Gauweiler and others argue the ESM violate Germany's constitution.
In requesting that the court postpone its decision in the ESM case, Gauweiler argued the ECB's bond-buying decision "created a completely new situation" regarding whether the fund was constitutional.
He argued that the prospect of the ECB buying bonds makes the overall risk for the German budget "completely incalculable" and that the bank's potential actions would override Parliament's rights to supervise the fund.
But the Federal Constitutional Court said in a short statement that it would go ahead with its scheduled ruling. The court's decision on the injunction is widely anticipated as a harbinger of how it might rule on the constitutionality of the ESM overall.
(AP) BERLIN - The German government anticipates the country's highest court will this week reject an attempt to scuttle the ratification of the eurozone's permanent rescue fund.
The German parliament has already approved the rescue fund, but the president has yet to sign off as part of the ratification process. The court is due to rule Wednesday on a complaint seeking an injunction against the ratification.
Steffen Seibert, a spokesman for Chancellor Angela Merkel, said Monday the government is "convinced" the euro500 billion ($640 billion) European Stability Mechanism is constitutional and expects the court to agree.
A backbench lawmaker with Merkel's conservative bloc has asked the Federal Constitutional Court to delay its ruling in light of a European Central Bank announcement that it would in certain cases purchase government bonds to help financially troubled countries.
But Seibert said the government believes the ECB's move doesn't affect the court ruling.
The proposed bond purchases led the lawmaker, Peter Gauweiler, to file an additional complaint Sunday with the court, which could affect this week's proceedings. The court said it would rule Tuesday on how the additional complaint would affect the proceedings.
(AP) ATHENS, Greece - Greece's prime minister held a new round of negotiations Monday with representatives of the country's bailout creditors, who are demanding a fresh round of controversial austerity cuts.
Antonis Samaras' meeting with officials from the so-called troika of the European Union, International Monetary Fund and European Central Bank comes a day ahead of his talks in Frankfurt with ECB president Mario Draghi.
Troika officials are "evaluating" Greece's proposals for the 11.5 billion euro ($14.6 billion) austerity package for 2013-14, Finance Minister Yannis Stournaras said.
"It's a tough discussion, because the measures are tough," he told journalists after attending Monday's negotiations. Asked whether Greece's creditors are insisting on job cuts in the country's bloated, inefficient civil service, Stournaras only commented that: "We are trying to convince them that our arguments are correct."
In talks with Stournaras Sunday, troika officials rejected part of the Greek proposals, and Samaras is now engaged in a two-front effort with creditors and his coalition allies to hammer out the measures, without which Athens will lose its vital bailout funds.
Debt-crippled Greece has been kept afloat by rescue loans from its European partners and the IMF since May 2010. As a necessary condition for the money to keep flowing, it has repeatedly cuts pensions and salaries, hiked taxes, watered down labor laws in benefit of employers and raised the retirement age - incurring deep resentment that led to a series of strikes, and protests, many violent.
The bulk of the new unpopular savings - which have still to be approved by minority partners in Samaras' conservative-led coalition - are expected to come from pension and civil service pay cuts. Samaras' two center-left coalition partners say they want to protect low-income Greeks from further pain, and rule out across the-board pension cuts.
A further sticking point is layoffs in the public sector, which employs about one in four Greeks and guarantees them jobs for life. At the same time, hundreds of thousands of jobs have been lost in the private sector, with more than 1.2 million people, or 24.4 percent of the workforce, out of a job in June.
Samaras will hold a new effort Wednesday to talk minority partners into backing the cutbacks. The governing coalition was formed in late June, with all three parties pledging to respect Greece's bailout commitments but seek easier terms, including a two-year extension in the deadline for the new cuts.
Labor unions strongly oppose the new measures, with the main ADEDY civil servants' union saying Monday it planned to call a general strike "in the immediate future," together with the GSEE umbrella public sector union.
On Monday, university professors launched a two-day strike in the midst of the autumn exam period, while staff at technical universities will walk off the job all week. Academics say in some cases the new cuts will take more than 25 percent off their pay - which has already been reduced by 25 percent over the past two years.
State nursery and primary school teachers will be on strike on Wednesday, the second day of the school year, while secondary schoolteachers will also hold work stoppages. Tax collectors will be on strike on Thursday, while police and judges unions held protests last week.
On Saturday, an estimated 20,000 people took part in largely peaceful anti-austerity marches organized by GSEE, ADEDY and other groups in the northern city of Thessaloniki.
(AP) NEW YORK - The last time the stock market was this high, the Great Recession was just getting started and stocks were pointed toward a head-first descent.
But on Thursday, the market moved swiftly in the other direction. The Standard & Poor's 500 index soared to its highest level since January 2008, and the Dow Jones industrial average hit its highest mark since December 2007.
A concrete plan to support struggling countries in Europe provided the necessary jolt, and the gains were extraordinarily broad. European markets surged and U.S. Treasury bond prices dropped as traders sold low-risk investments. All but 13 stocks in the S&P 500 index rose.
"There's just a sea of green," said JJ Kinahan, TD Ameritrade's chief derivatives strategist. "It's pretty fun."
At a long-awaited meeting Thursday, Mario Draghi, the president of the European Central Bank, unveiled a new program to buy government bonds from the region's struggling countries with the aim of lowering their borrowing costs. Draghi said the program will have no set limit on how much it can buy.
Kinahan praised Draghi for two details in the plan. He didn't declare a limit for the bond-buying program and said it wouldn't put itself first in line in the event of a default, something investors had been clamoring for. Both details should make other investors more willing to buy government bonds along with the ECB.
"In a situation where it was easy to have a slip-up, it seems like he did everything right," Kinahan said.
The Standard & Poor's 500 index soared 28.68 points to close at 1,432.12. The Dow jumped 244.52 points to 13,292.
The Nasdaq composite index also reached a milestone, gaining 66.54 points to 3,135.81. That's its highest level in 12 years.
European stock markets soared in response to Draghi's announcement. Germany's DAX and France's CAC-40 each rallied 3 percent.
The gains were even larger in Spain and Italy, the two largest countries to get caught up in the region's long-running government debt crisis. Spain's benchmark index soared 5 percent, Italy's 4 percent.
The interest rates on Spain and Italy's government bonds sank, a sign investors anticipate a surge in demand for them when the European Central Bank starts its bond purchase program. Spain's benchmark 10-year bond yield fell to 6 percent from 6.39 percent. Italy's comparable bond yield fell to 5.21 percent from 5.43 percent.
Traders shifted money out of U.S. Treasury bonds, considered one of the world's safest places to stash money, and the drop in demand lifted yields. The yield on the 10-year Treasury note rose to 1.67 percent, up from 1.60 percent late Wednesday.
In an encouraging sign for the U.S. job market, a report from the payroll processor ADP said businesses added 201,000 jobs last month, the most reported by the survey since March.
Separately, the Labor Department said the number of people applying for unemployment benefits fell by 12,000 last week to 365,000. That figure won't affect the August jobs report, due out Friday, but could be a sign of a better hiring this month.
Even before Thursday's surge, the stock rally has been one for the record books.
Last month, Jim Paulsen, chief investment strategist at Wells Fargo Capital Management, published a report showing the more than doubling of stock prices from a recessionary low in March 2009 has surpassed every post-World War II stock rally.
"We've been told from the start that this stock market was going to be low return and high risk, but it's turned out to be the best ever," said Paulsen, as the S&P was shooting higher Thursday. "Fear was way overdone."
(AP) MADRID - For months, Spanish Prime Minister Mariano Rajoy and German Chancellor Angela Merkel have been at odds over how eurozone countries could defeat the 17-nation bloc's relentless financial crisis.
Rajoy balked at the indignity of having to ask for a bailout - and the conditions it entails - that many observers believe his ailing country needs. Merkel stood firm, saying any financial rescue would come with strings attached.
On Thursday, the two leaders appeared to set aside their differences at a friendly joint news conference in Madrid as part of a European push to end the crisis. The European Central Bank on the same day unveiled a new program to help eurozone nations borrow money at affordable rates.
"There are still lots of problems, lots of things to be fixed in Spain," said Jose Ignacio Torreblanca, who heads the Madrid office of the European Council on Foreign Relations. "But I think (leaders) have understood that this game of chicken that they were playing was going to be very costly for everybody because at some point you could lose control."
Rajoy refused to say whether his government would tap the ECB bond-buying program, which would come with strict policy conditions. But Rajoy did give a nod to Germany's demands for fiscal discipline. Spain "must control its public finances," he said.
Merkel, meanwhile, heaped praise on Spain's efforts so far to cure its ills by cutting spending and enacting economic reforms designed to pull it out of a double-dip recession and lower an unemployment rate that stands at almost 25 percent - the highest among countries using the shared currency.
On Thursday evening several hundred people gathered outside the European Union's headquarters in Madrid to protest what they said is Germany's meddling in Spain's economy and ratcheting up the pain for everyday Spaniards. Some carried banners reading, "No to a German Europe" and "Merkel No, a IV Reich No."
The protesters included Rafael Anibal, 29, an unemployed journalist who said he is leaving Spain for Israel next month. "I'm here because I'm against Angela Merkel and my own government. They are both taking advantage of the situation to get rid of the welfare state."
But, notably, Merkel said she did not travel to the Spanish capital to lay down the law. She insisted that the two did not discuss extra measures Spain would be required to take if the ECB were to start buying Spanish bonds.
"We didn't discuss anything about possible conditions," Merkel told reporters. "I didn't come here to say what reforms Spain must make."
Rajoy and Merkel "staged the whole thing in order to ease ... tensions publicly. They are very conscious of how critical the situation is and they each decided to back down a bit (toward) the other," Torreblanca said.
"I think they are very worried about the trends they see ... in the markets. They see things going wrong," he said. "This is probably the most important thing from today's visit. They wanted to back down and contain things. They realized there was little else to do."
Madrid's IBEX-35 stock index jumped 4.9 percent after the news conference and the ECB announcement. The rate Spain pays on its 10-year bonds dropped 0.39 percentage points to 6 percent, the lowest level in months and an indication of greater investor faith in the economy.
Spain's government has been pressing for months for the ECB to buy Spanish bonds, but has stressed that it shouldn't be forced to impose more austerity it says would choke growth and fuel social unrest.
Rajoy said the wave of tax hikes and spending cuts he has pushed through since January "are very difficult measures and difficult to explain, but in the situation that we're in, we have to do it."
Few analysts doubt Spain will end up requiring a financial lifeline to deal with its economic troubles.
"Spain is in a very delicate situation, and we do need a full bailout," said Robert Tornabell, finance professor at the ESADE Business School in Barcelona.
Nevertheless, the ECB and possibly the International Monetary Fund will keep a close watch on countries helped by the bond-buying program, to make sure they don't backslide on promises to cut their debt levels.
"Now the ball's in our court," said Jordi Fabregat, a financial management professor at ESADE, referring to the Spanish government.
Rajoy would say no more on the subject of more cuts. "When I have something new, I'll communicate it," he said.
Merkel said she and Rajoy discussed a separate bank rescue package aimed at propping up the country's lenders hurt by a property boom that went bust, and the deteriorating financial condition of Spanish regional governments that function much like U.S. states.
(AP) FRANKFURT, Germany - The European Central Bank unveiled its most ambitious plan yet to halt Europe's financial crisis on Thursday with a pledge to buy unlimited amounts of the government bonds of countries struggling to manage their debts.
Large-scale purchases of short-term government bonds would drive up their price and push down their interest rate, or yield, making it less expensive for countries to borrow money. The new plan goes well beyond the ECB's earlier, limited bond-purchase program, which was not big enough to decisively lower borrowing costs.
After the ECB plan - dubbed Outright Monetary Transactions or OMT- was announced, the yields on government bonds across Europe fell and stock markets rallied.
"This is a potential game-changer," says Jacob Kirkegaard, research fellow at the Peterson Institute for International Economics. "This is the first time the ECB has committed its balance sheet in this way. And the way it is done is politically sustainable in Europe."
But the ECB's pledge of support came with a caveat: Countries that want the central bank to help with their debts must first seek emergency aid from the bailout funds managed by the 17 countries that use the euro and submit their economic policies to the scrutiny of the International Monetary Fund. That puts enormous pressure on heavily indebted countries such as Spain and Italy, which have been reluctant to seek help from their euro partners.
Christine Lagarde, Managing Director of the IMF, welcomed the ECB plan Thursday and said the organization stood "ready to cooperate".
Analysts warned that while the ECB plan would provide short-term relief to European countries and financial markets, it doesn't address underlying economic weakness across the region, which could persist for years.
Still, investors cheered the move. Spain's interest rate on three-year bond was down 0.17 percentage points to 3.73 percent while its 10-year bond was down 0.3 percentage points on the day at 6.12 percent. Meanwhile Italy's 10-year rate was down 0.1 percentage points at 5.33 percent and its rate for three-year bonds was down 0.06 percentage points to 3.02 percent
In Europe, Germany's DAX was up 2.7 percent at 7,153 while the CAC-40 in France surged 2.7 percent to 3,497. The FTSE 100 index of leading British shares was 1.6 percent higher at 5,750.
The possibility of ECB intervention impresses markets because, in theory, the central bank has unlimited funds at its disposal. As the issuer of the euro currency, it can simply create new money to buy the bonds from banks. The eurozone's bailout funds could buy bonds as well, but they have concrete limits on their finances set by governments that are putting up taxpayer money - and much of that is already committed anyway to bailouts for Greece, Ireland and Portugal.
Still, rescuing governments from immediate disaster will only buy the eurozone time to fix its underlying problems. For one, the purchases do not solve the chronic imbalances that plague the currency union, with some countries able to export and grow while others remain uncompetitive.
There were other technical but important details revealed Thursday. The ECB agreed to give up preferred creditor status, which could have frightened away countries' other creditors afraid they would take all the losses in case of a default.
It also agreed to ward off any increase in the supply of money in the economy, a side effect of making purchases with newly created money. The bank said it would withdraw an equivalent amount from the financial system, which it can do by taking deposits or selling notes. That helps deflect off any criticism it is using its monetary powers to finance governments, which it is forbidden to do by the European Union treaty that created the euro.
The head of Germany's Bundesbank national central bank, Jens Weidmann, has opposed the bond purchases. He says they are too close to outright financing of governments. The treaty bars the ECB from loaning directly to governments.
The bank also left the refinancing rate unchanged Thursday at 0.75 percent, a record low.
Some analysts believed the program unveiled Thursday would not solve the underlying problems in the eurozone, however. "Without trying to be a 'party pooper'," said Neil MacKinnon, global macro strategist at VTB Capital, "suppressed borrowing costs certainly provide relief in the short term but do not resolve problems of solvency and debt unsustainability."
Draghi partly acknowledged that fear in his statement Thursday, saying that governments needed "to push ahead with great determination" to bring down budget deficits and make their economies grow faster.
(AP) FRANKFURT, Germany - The European Central Bank leaves its benchmark interest rate unchanged at 0.75 percent, holding off on further stimulus for the slowing eurozone economy.
Markets and analysts are focused instead on bank President Mario Draghi's news conference later Thursday, where he is expected to give further details about the bank's efforts to lower borrowing costs for heavily indebted governments.
The bank has said it is willing to buy up the government bonds of struggling countries such as Spain and Italy, this would lower their borrowing costs.
But the ECB expects them to first ask for help from the eurozone bailout fund. Markets want to know other key details, such as how big the purchases could be, and what kind of conditions would come attached to the help.
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