The greek central bank. Today it is greek greece versus germany. Warren buffett is saying the fed will find it tough to tighten rates. Lets check in on some of the stock moves is see this morning. They have their numbers down 1. 4 in terms of some of the individual names, bt did the deal of 12. 5 billion pounds giving deutsche calm a stake in the business deutschecome a stake in the business. What you have there is a delivery by para boss paribas, the lowest annual income since this company was put together, bnp and paribas. Corporate and Investment Banking did a little bit better year on year. 556 billion euros. Legal costs of 1. 1 billion. This is the big gear producer in switzerland. Demand up . 72 for the salesman and they have appointed a new chairman. They say all the growth this year will be around 10 . Jonathan so much to watch this morning. Looking at a lower market open here. The dax is a little lower as well. Since the market opened here in europe, of course it opened dominated by the story of the day, the ecb turning the screws on greece. The European Central bank announcing they would restrict loans to the nation. That came hours after the greek finance minister met with mario draghi. How do you think that meeting went . Greek stocks opened up in less than half an our time but if you want a hint, check out shares in the u. S. Listed etf. You see that etf plunging on the back of that news. The greek of finance minister continues to talk today, he meets with the german finance minister later on. Lets get with hans nichols. What are we expecting from that meeting . Hans we are expecting the german finance minister to present this unified european front. What you saw, out of the ecb last night when they announced they would not be accepting recruit precollateral greek debt as collateral for ecb loans. There is a separate issue greeces ability to issue new get. Theyre running against their limit. They want to get it up to 25 billion, a 10 billion bridge. But they need acquiescence from the ecb, the imf and the troika. We dont know if that will be granted, but the hardline last night on using greek debt as collateral suggests that might not be the case. The greek finance minister tried to put a brave face on this. They said the greek Banking System remained adequately capitalized and fully protected under emergency liquidity assistance. He did answer interview with German Television last night, it is still more of what he told in the interview that he has obligations to his own people to try to relieve the onerous obligations on then. Jonathan we go back to the ecb story it looks like greek banks will still have some access to ecb windows, what is available and for how long . Hans you have elas, emergency liquidity assistance. Every two weeks it is reviewed whether a country can have access to these. They still have access to that it is reviewed every two weeks. One important thing is the cost of borrowing under the ela window is much higher. When you look at what is taken away from greece last night, they were given an annual rate of. 05 percent. It is considerably higher and will put pressure not only on greek banks but on the greek government. Then they will see if they have the longterm availability to access these great greek banks if they leave the bailout program. Then things can get really ugly. Jonathan as if it wasnt ugly enough. Andy joins us now the executive director at Schroder Investment management. Andy, great to have you with us. Take the inside the Financial System here. On the surface it sounds like they turned off some liquidity. Hans andy when you get announcements like this, and you think who will take the pain . The stabilization funds, currently owns or 4 of the greek bond market and those bonds have a average duration of 32 years. If the whole thing goes pete and the greeks peak and the greeks believe, there will be a huge on those bonds. At the moment, they will have to pony up the money. If you are hsbc, you will be looking at your exposure, how much greek bond on your balance sheet. You probably dont want any and they will be selling those. If you are in greece, we have seen them withdrawing billions of euros. When that starts it is very hard to stop. All the fighting is invariably leaving to the excel a ration of greece leaving the euro. Jonathan what is stopping me from taking my money out and putting it in another European Bank . Andy nothing at the moment. If they get restricted funding, then they havent at the cash. Thanks, in theory, cannot alter it up and say i will have my money back. People will be looking at the euro saying it is not worth the same printed in greece is not worth the same as someone else. Jonathan is it strange that we could get capital controls in grace . Andy they will run out of money and then they restrict funding. You solid happened interest cyprus, people said i want my money back and they said you cannot have it that you can have a bond tied to the share price of the bank and you might get Something Back in 10 years time. You might see crowds in greasing i want my money out now. If they crowds in greece saying i want my money out now. If they do jonathan they are playing with fire. In your opinion, are they abusing their power . Andy it is a bit like being a parent. I have three kids. If one of them comes up to me and i give in to them, the other two ask for the same. Labor the ecb same favor. The ecb are in that position now. If they give into greece, they have spanish elections in may and the italians will say why are you looking out for that country . Why are you looking out for that child . An impossible position. Jonathan we will talk more about the politics and what this means after the break. A quick check on the top stock stories. Bt will finally by ee for 12. 5 billion pounds. Over in germany diamler beats estimates. That stock trading a little bit lower and bnp paribas frances largest Bank Reported a surge in fourthquarter stock. We spoke with the company cfo. Of course there is a major exception the fine paid to u. S. Authorities but as you know the bank has taken remedial action and this is basically the top line. It has blown in all grown in all businesses. Jonathan welcome back, i am Jonathan Ferro live from the city of london. Greece dominating the headlines. The ecb tightening the screws on greece was drifting after restricting access to funding. Restricting access to funding. I want to start with you, talk to me about the politics. You have a meeting with the greek of finance minister and then a couple hours later a decision. Not exactly a ringing endorsement of greek politics. I think the ecb is sending a clear message that greece will have to comply to the program because the deadlines are very strict. At the same time it is also sending a message to the rest of europe. Because as i said the deadlines are very strict. Greece is going to be running out of money if we dont get a new program. Jonathan andy what is your take on the cash crunch . Could the 20 days or a month . Andy if you see people queuing outside banks, like over here when people are queuing outside northern rock, it disappears overnight. If youre sitting in greece watching bloomberg, which they are, they could be saying i need to get to the bank and have my money back. Then as we saw in cyprus, they suddenly go. It is the rest of europe that pays the price. Vasileios i fully agree with that. I dont think it is so much of the additional cost burden accessing liquidity through a more costly operation, i think it is much more about a signal. We have a firm stance right there. And you need to get your act together. Jonathan a signal for spain as well . Andy look at some of the opinion polls in spain. They look like they have a good shout running up and spain is a big economy and then you go to italy, the thirdlargest odd market in the world and even germany cannot say that. Are we seeing the whole project unwind . Lets sacrifice greece and hopefully hold the whole thing together. Jonathan and he said to me before the program started, in football germany always wins, i asked if they win this time . You see the people in greece push toward making this very decision. The extreme left if you want to call it that. How does that the political contagion rollout . Vasileios i am not entirely sure about greece. Voters rolling over to the left there was a good article in which it was really discussed that basically the antieuro austerity voters did not increase in size but reshuffled themselves. From smaller parties. I wouldnt call it a matter of winning or losing, but i will say this i think the equalization government will have to grow through very serious contention enter terms of what they have actually announced in the preelection. Andy what europe desperately needs is inflation. You are getting cuts in salaries and deflation across europe the moody report, one of the top firms in london said their downgrading the german Life Insurance interestrate industry because they cannot make any money off the interest rates. Vasileios personally, i think we will start seeing some sort of a pickup in demand and inflation. I think this is largely going to be filtering through laurel Lower Oil Prices. Jonathan when i look at the italian bond market, up a couple basis points. That is good news for the rest of europe and if europe once the tie i hard line they have the markets on their side. Andy the bond markets have been so distorted by qe, no one knows the right price for a bond. And that causes a dilemma because everything is priced off the bond market. People say equities are cheap, if they are cheap next of bonds, but if bonds are expensive, what does that mean . What were seeing now because of qe intraeurope, a negative because of qe in europe, a negative bond . Vasileios i think the observation is very right in terms that the market is not pray paying attention to greece. Not only in the bond market, you can see with the euro, as well as the equity market, it is now the first year that we are seeing a strong outperformance related to u. S. Equities. Jonathan they missed an 8 pop. Vasileios the market is taking a view that we dont care so much about greece right now. Jonathan the bond market needs to decide what a bond is worth and no one seems to know, the ecb is coming to the market in march and i look at the greek Banking System and stocks. Does that pose Systemic Risk . Have we been lulled into a false sense of security . Andy no one knows from where we sit how many of these greek bonds or loans sit on the Balance Sheets of u. K. Banks. European banks could be quite exposed. The danger is if greece is forceout then you have to write down the value of your assets which means you can lend less money. The u. K. Has been through this and the u. S. , the European Banks havent taken any haircuts as such. The last thing they want to see is that. If that happens then the banks lend less money and europe continues its downward path. Jonathan another reason to sell the euro . Vasileios i think risk for the Downside Remains firmly in place. Unless the unthinkable happened in which greece exits the euro where there will be a period of time with excessive a la tillie, the euro will not be traded on the back of greek development. It is still trading on the diversions between the fed and the major Central Banks as well as all the discussions about qe. Having said all that, i dont think the euro will relapse to parity or below that. I think it could start providing cushion further down the road. We have to take into account that we are seeing some improvement in service. Jonathan it seems that ecb still holds all the cards, thank you for joining me this morning. Thank you both. Up next, more about greece. And bt has agreed to buy ee. More on that 12. 5 billion pound deal after the break. Jonathan welcome back to on the move. Bt has decided to buy ee for 12. 5 billion pounds. Caroline hyde joins me now they finally confirmed the deal. Caroline a lovely quote on twitter saying, the end of the foreplay, now lets talk about quad play. They want to be able to open mobile as well as tv and landline. That is worth 12. 5 billion pounds. There could be some regulatory issues. We are ready have the ceo of vodafone saying competition is the market authority, it will need clearance but we think this will go through because the number one player the way they will do this is they will be funding it with debt and one billion pound share placement. Interesting they are inching higher. Nevertheless, the winners intrathis are Deutsche Telekom the winners in this are Deutsche Telekom. They are keeping 12 in the enlarged bt and cash from the orange defense player who wants 3. 4 billion pounds in cash. But this dealmaking is rife. We have patterson saying this is a worldclass digital infrastructure. Jonathan can we expect more . Caroline we still have players to come. Bt plus ee, it is eyeing up 02, could it by telefonicas 02 unit. Sky has got into bed with o2 offering mobile services with broadband and television, it has quad play down. Vodafone has signed a deal with bt to offer broadband. It wants to build its own tv network itself. But noticeably absent in terms of m a. Jonathan the other big story is greece. We will be talking about it after the break. Reacting to last nights decision to restrict some liquidity to the greek banks by the ecb. The yield up 278 basis points. Hardly any liquidity in this market we will be talking about bonds. Stay tuned for that. Jonathan welcome back to on the move. I am Jonathan Ferro. 30 minutes into the trading day. Here is your picture of the markets. Ftse 100 lower by half of 1 . The dax is up by almost one third of 1 . Ftse mib in italy. The greek stock markets just start to open up. Many people expect losses to accelerate through the morning. The ecb removes some financing for greek banks. That is the equity market story. The moves in the greek bond market are quite significant. There is very little liquidity here and only a few trades, but a threeyear up 330. Greek yields are higher. We want to dive into these markets and look through some of the top stories, with caroline hyde. Caroline doom and gloom if you happen to be on the equity market. Security us, securitas they provide guarding, they give you armed guards to monitor safety at these areas. It is the second biggest guarding service provider. The shares for are at the highest level for 12 years. Meanwhile, nokia and ring cap gnocchi and rent cap nokian renkaat, Third Quarter sales beat analyst estimates. They say, they will be a little bit lower than previous years. There seems to be relief that the sales have beaten and it analyst estimates. Meanwhile swatch, feeling the pain of the swiss franc. The worst performer on the stoxx 600 this morning. Im changed for the first time in five years. Clearly this is a company that no longer wants to promise handouts to investors. Putting off sales of course saying they are already seeing some of their brands raising prices as much as 7 to upset the surge in the frank. Franc. If youre selling intraeurope, less bang for your buck. They say, already 138 million francs have eaten into their gross revenue. They say we are selling well but when you convert that back and it does not look so pretty. Jonathan swatch having a tough time and greek assets having a rough ride as well. The ast getting slammed it now up by 9 . The yield on the 10 year increased by over 100 basis points. The yield up i over 300 basis points. Not much liquidity yes 81 of greek debt is housed in the official sector that still pretty ugly. Greek bonds are the story this morning. The focus after the ecb decided to cut off some financing for greek banks. That is the news just hours after the greek finance minister met with mario draghi in frankfurt. Lets go straight to hans nichols. All eyes on berlin today. Hans all eyes on berlin and whether or not he can walk act this crucial aspect which seems to be the approximate cause of the precipitating event. They have decided to leave the bailout program. That expires february 28. After that, greece has said they want to be on their own. What the ecb is saying is, not so fast. If you are going to be on your own, youll have a difficult time borrowing. A couple of issues, their ability to use greek debt as collateral and the other issue, can they issue more tbills. More shortterm debt . They had went to get bridge financing, if they dont do that, they will have until february 25 then they will run out of cash. Before, they will have enough money to go all the way into the summer. It is just one of the many crunch dates. One thing he said, even though we might be the first, no, we are not responsible or the domino effect. We are but the canary in the coal mine saying we are not to blame if this goes south. Jonathan you will be all over this story im sure on the pulse and on the move. Im joined by the fixed income and i share strategist over at blackrock thank you for joining us. I am looking at a threeyear note in greece. What can you read into that . Stephen i think what that tells you is where he worked six months ago when greek yields were getting lower and lower and lower, there is dramatic change and i think to us the key thing is what is the contagion outside of greece. What happens to greek assets and what happens to european equities . Three years ago, anything like this you would see an immediate reaction. In the last couple of weeks what you have seen has been fairly muted. They have underwritten to enter extent the other bond markets. Jonathan i look at the 10 year in italy, up just a couple basis points. For you guys, you sit at the table at blackrock, the word grexit is that coming up . Stephen it comes up a fair amount. We still believe that ultimately we will end up with some kind of compromise. I think there is a lot to lose on both sides. What you saw with the ecb last night was to say this cannot keep dragging on. The ecb is a huge player and mario draghi will be worried about the contagion risk throughout europe which he has worked hard to undo. Greek exit is definitely a risk. Clearly you cannot ignore the rest. Jonathan i look at the banks this morning and the equities in grace, down over 20 as ecb tightens up some of the financing when you look outside of that and look to the debt markets and the credit space, what are you seeing . Is it brutal in the sovereign debt market for greece . Stephen yes, there are some liquidity issues around good credit. The thing we have seen is bifurcation over the last three or four months.