• Greece is being relieved of 105 bln of debt
• Today is historic for Greece, Greeks, economy
• Can’t save pension system without saving economy
• Moral issue of pension funds not in debt swapCDS activation not a concern for Greece

UK DATA: Jan NSA Construction Output Down Sharply
————————————————————————
Non-seasonally adjusted construction output fell sharply in January
following a large decrease in December, figures published by National
Statistics Friday showed. Construction output fell 12.3% on the month in
January, after a 11.8% monthly decline in December. Output was down 2.3%
compared with January 2011. As the monthly data are non-seasonally
adjusted and there is only a short data series available for analysis it
makes interpreting the data difficult. December and January are weak
months for construction output, due to the colder weather. This January,
however, was weaker than the 6.8% monthly drop last year. Looking at
both December and January together, though, the falls this year and last
are broadly similar. Output in Q4 on a seasonally adjusted basis was
revised slightly to show a fall of 0.2% on the quarter. National
Statistics said this would have no impact on GDP in Q4.

LONDON (MNI) — Non-seasonally adjusted construction output
fell sharply in January following a large decrease in December, figures
published by National Statistics Friday showed.

Construction output fell 12.3% on the month in January, after a
11.8% monthly decline in December. Output was down 2.3% compared with
January 2011.

As the monthly data are non-seasonally adjusted and there is only
a short data series available for analysis it makes interpreting the
data difficult.

December and January are weak months for construction output, due
to the colder weather. This January, however, was weaker than the 6.8%
monthly drop last year.

Looking at both December and January together, though, the falls
this year and last are broadly similar.

Output in Q4 on a seasonally adjusted basis was revised slightly to
show a fall of 0.2% on the quarter. National Statistics said this would
have no impact on GDP in Q4.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]

–Feb Producer Output Prices +0.6% m/m; +4.1% y/y

LONDON (MNI) – Output prices rose at their fastest since April 2011
and core inflation ticked up for the first time in five months, raising
concerns over the inflationary outlook, figures from National Statistics
showed Friday.

A possible pick-up in producer price inflation has been highlighted
by some Monetary Policy Committee members recently as a possible reason
why consumer price inflation could turn out higher than the Bank of
England’s latest forecast.

Output prices rose 0.6% on the month in February, causing inflation
to rise to 4.1% from 4% in January. This was double the median
expectation for a rise of 0.3% on the month and above the 3.9% median
for the year.

Core output prices, which exclude food, beverages, tobacco and
petroleum, rose 0.5% on the month taking inflation up to 3% from 2.4%,
the first rise in inflation since September.

MPC member Martin Weale cautioned last week about rising prices.
“Import prices have been rising more than one might have expected and
…. if that sort of process goes on and no offsetting adjustment takes
place, then it could turn into one reason why inflation might be higher
than we think,” he said in a speech at CASS Business School.

Input prices leapt 2.1% on the month, the largest rise since
September 2011, and were up 7.3% on the year. This was way above the
median for a 1% monthly increase and 7% rise on the year.

The latest rise was mainly due to increases in crude oil, home
produced food, fuels and imported metals.

If the latest rises begin to feed through to CPI inflation then it
makes it more likely that the MPC will maintain the current policy
stance rather than adding to the current stock of QE.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: M$B$$$,MABDS$]

–Jan manufacturing output +0.1% m/m; +0.3% y/y
–Jan industrial production -0.4% m/m; -3.8% y/y

LONDON (MNI) – Manufacturing output growth eased in January,
following a strong rise in the previous month, while a fall in
industrial production means a weak start to the sector in the first
quarter, figures released by National Statistics showed Friday.

Manufacturing output rose 0.1% on the month in January and was up
0.3% on the year, below the median for a 0.3% monthly increase but in
line with the median for the year. December was revised up by 0.1
percentage point to show a rise of 1.1% on the month.

The wider measure of industrial production was pulled lower by a
further fall in utilities’ output which fell 1.2% on the month, probably
due to warm weather. Mining and quarrying fell 3% on the month,
following a 2.9% decline in December, as oil and gas extraction dropped
3.3%.

The figures are a little disappointing although following the
strong December it wasn’t too surprising to see manufacturing growth
ease in January. Colder weather in February also suggests a positive
addition from the utilities sector in the next release.

–London newsroom 4420 7862 7491 email: puglow@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]

–BOE/GfK NOP: Feb Year Ahead Inflation Expectations 3.5% Vs Prev 4.1%
–Longer-Term Inflation Expectations Now 3.2% Vs 3.5% Previously
–Public Estimates Of Current Inflation Ease To 4.8% Vs 5.0% In Nov

LONDON (MNI) – Inflation expectations for the year ahead eased back
in February to 3.5% from the 4.1% seen in November, the latest Bank of
England/GfK NOP Inflation Attitudes survey shows.

This was the lowest reading on this measure since August 2010.

Expectations for inflation in the 12 months after that also eased
back to 2.9% from 3.4% In November while longer-term inflation
expectations (i.e. in 5 years time or so) fell to 3.2% from the 3.5%
seen in November.

Public perceptions of the current rate of inflation fell back from
the 5.0% seen in November to 4.8%.

This latest survey was undertaken between Feb 9 and 14 and in a
second wave of interviews between Feb 16-21. All in all 3,789
respondents were interviewed.

The results of this survey should reassure the Monetary Policy
Committee of the Bank of England that inflation expectations are falling
back in line with the drop in headline CPI from the peak of over 5% it
saw late last year.

The survey found the lowest net balance of respondents expecting
interest rates to rise over the next 12 months since February 2009 – at
+28%.

Asked how satisfied they were with the job being done by the Bank
of England to keep inflation under control, the net satisfaction balance
was +20 – sharply higher than the outturn seen in November of +9%.

–London newsroom: 4420 7862 7492; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]

UK DATA: Feb Producer Output Prices +0.6% m/m; +4.1% y/y
————————————————————————
Output prices rose at their fastest since April 2011 and core
inflation ticked up for the first time in five months, raising concerns
over the inflationary outlook, figures from National Statistics showed
Friday. A possible pick-up in producer price inflation has been
highlighted by some Monetary Policy Committee members recently as a
possible reason why consumer price inflation could turn out higher than
the Bank of England’s latest forecast. Output prices rose 0.6% on the
month in February, causing inflation to rise to 4.1% from 4% in January.
This was double the median expectation for a rise of 0.3% on the month
and above the 3.9% median for the year. Input prices leapt 2.1% on the
month, the largest rise since September 2011, and were up 7.3% on the
year. This was way above the median for a 1% monthly increase and 7%
rise on the year.

UK DATA: Jan manufacturing output +0.1% m/m; +0.3% y/y
–Jan industrial production -0.4% m/m; -3.8% y/y
————————————————————————
Manufacturing output growth eased in January, following a strong
rise in the previous month, while a fall in industrial production means
a weak start to the sector in the first quarter, figures released by
National Statistics showed Friday. Manufacturing output rose 0.1% on the
month in January and was up 0.3% on the year, below the median for a
0.3% monthly increase but in line with the median for the year. December
was revised up by 0.1 percentage point to show a rise of 1.1% on the
month. The wider measure of industrial production was pulled lower by a
further fall in utilities’ output which fell 1.2% on the month, probably
due to warm weather. Mining and quarrying fell 3% on the month,
following a 2.9% decline in December, as oil and gas extraction dropped
3.3%.

Biggest y/y  fall since Nov 2009

Jan Manufacturing Output +0.1%m/m, +0.3% y/y  (expected +0.3%m/m,-0.2% y/y)

Feb Core producer output +0.5% m/m, +3.0% y/y (exp +2.5% y/y)

Feb Input prices +2.1% m/m, +7.3 % y/y (exp +6.8% y/y)

Feb Output prices +0.6% m/m, +4.1% y/y (exp +3.9% y/y)

Reuters reporting.

Commission spokesman said “Technicians of the European Commission have been in Madrid this week to collect information on the 2011 public accounts” adding “it is a normal practice in all countries under an excessive deficit procedure”

ITALY DATA: January SA industrial output -2.5% m/m, WDA -5.0% y/y,
on a contraction across all output sectors, posting the worst fall in
the y/y index since Dec 2009 (-6.5% y/y). The m/m decline follows m/m
gains of +1.2% in December and +0.2% in November.
–January unadjusted y/y output fell -2.1%, up from -7.7% y/y in Dec
(there were 21 working
days in Jan 2012 Vs 20 working days in Jan 2011).
–See details MNI main wire for more details.

Much weaker than Reuter’s median forecast of -0.8%.

Portuguese/German 10 year govt bond yield spread has narrowed to 1187 bps from 1206 I jotted down first thing

Italian/German 10 year govt bond yield spread has narrowed to 287 bps from 300

Spanish/German 10 year govt bond yield spread has narrowed to 315 bps from 326

–Adds Political Background In Final Two Paragraphs

PARIS (MNI) – Participation of private sector creditors in Greece’s
debt exchange offer (PSI) will be 95.7%, which covers E197 billion out
of a total of nearly E206 billion worth of privately held Greek bonds,
the country’s Finance Minister Evangelos Venizelos announced Friday
morning.

This figure includes E152 billion or 85.8% of bonds governed by
Greek law and E20 billion or 69% of bonds under non-Greek law.
Participation of bond holders with the remaining E25 billion will be
achieved through enforcement of collective action clauses that will
force them to accept the terms of the debt swap offer.

The total voluntary participation among all classes of bond holders
– E172 billion out of E206 billion — is 83.5%.

“On behalf of the Republic, I wish to express my appreciation to
all of our creditors who have supported our ambitious program of reform
and adjustment and who have shared the sacrifices of the Greek people in
this historic endeavor,” Venizelos said in a written statement. He
pledged that Greece would continue to implement the budget cuts and
structural reforms to which it has committed.

Those reforms are a condition of further aid from Greece’s official
sector lenders, the EU and the International Monetary Fund. They have
pledged a second bailout package of up to E130 billion for Greece if it
complies with the austerity policies and longer-term reforms demanded.

Another condition official lenders have attached to the second
bailout is successful completion of the PSI deal. Without the new
bailout and the PSI deal, Greece had been expected to default on some
E14.4 billion worth of bonds maturing March 20. But that now seems
unlikely to happen.

The participation rate of 95.7%, though augmented by use of the
collective action clauses, is beyond most expectations and already
deemed a great success. It is likely to be endorsed enthusiastically by
Eurozone finance ministers in a teleconference they are scheduled to
hold this afternoon at 1300 GMT/0800 ET.

France’s Finance Minister Francois Baroin, in a radio interview
this morning, called the PSI result “a beautiful success,” adding that
it “avoids default and thus the risk of a collapse of Greece, [and]
allows us to attain all the objectives we had set.”

Greece’s creditors also waxed enthusiastic. Josef Ackermann,
chairman of Deutsche Bank and of the Institute of International Finance,
which represented banks in the negotiations with Greece, said the PSI
outcome was a “very strong and positive result.” It will provide a
“major opportunity now for Greece to move ahead with its economic reform
program, while strengthening the euro area’s ability to create an
economic environment of stability and growth,” he added.

The reaction from Germany, whose Finance Minister Wolfgang
Schaeuble had resisted a second bailout and pushed for a hard default,
will be key.

Anticipation of a high participation rate had been building over
the last 24-36 hours. The European Central Bank, which had removed Greek
bonds from the list of eligible refinancing collateral after they were
declared in default, said Thursday that it would begin accepting them
again.

Under the terms of the PSI deal, investors would receive 15 cents
on every euro in the form of short-term securities issued by the
European Financial Stability Facility, which are virtually cash
equivalents.

Of the remaining 85 cents, 31.5% would be in the form of newly
issued bonds, which would have lower coupon rates but — in a major
concession to foreign investors — would be subject to English, not
Greek law. The other 53.5 cents would be written off as a loss.

Investors will receive special “GDP warrants” that would entitle
them to additional payments should Greece’s economy outperform
expectations.

Because of the lower coupon rates on the new bonds, the real net
loss on the bonds would be close to 75%. The deal should reduce the
nominal value of Greece’s outstanding debt by more than E100 billion.

There are still some potential pitfalls, including possible legal
challenges from bond holders who are either forced to participate in the
debt reduction scheme or who, declining to participate, receive nothing
for their outstanding bonds.

In a blunt statement earlier this week, Greece’s Public Debt
Management Agency noted that Athens did not have funds available to pay
investors who refused to participate in the PSI deal. That statement was
aimed at the holders of bonds not subject to Greek law, since Athens did
not have the leverage of the collective action clauses to hold over
them.

About 31% of those bond holders, with holdings of roughly E9
billion, have so far either declined to participate in the PSI deal or
not responded to the offer, according to the figures provided by the
Greek Finance Ministry. The ministry noted that their deadline for
responding has been extended to March 23 at 2000 GMT.

“After that,” Venizelos warned, “there will be no further
opportunity for creditors holding those instruments to benefit from the
package of EFSF notes, co-financing and GDP linked securities which form
an important and integral part of our invitations.”

Venizelos is scheduled to hold a press conference today at 1100
GMT/0600 ET. He is widely expected to announce his resignation either
today or tomorrow in order to run for the leadership of the Socialist
Party (PASOK), ahead of national elections to be held in late April or
early May. The Socialist Party is currently headed by former Prime
Minister George Papandreou, who has pledged to step down before the
election.

The Greek government is expected to hold a cabinet meeting sometime
after 1500 GMT/1000 ET today, after which Prime Minister Lucas Papademos
is likely to issue a statement.

–Paris bureau, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$Y$$$,M$X$$$,MGX$$$,M$$CR$,MT$$$$]

PARIS (MNI) – France’s central government deficit at end-January
amounted to E12.5 billion, down E918 million from the previous-year
level, the Budget Ministry said Friday.

Outlays totaled E32.8 billion, E6.5 billion higher than in January
2011. This was mainly due to a new financial management system that
allowed ministries to hit the ground running at the start of the year,
the ministry explained.

Revenues in January were nearly E2.9 billion higher on the year at
close to E23.4 billion, thanks mainly to the one-off sale of new airways
frequencies for E2.6 billion. Tax receipts were up E1.6 billion on the
year, in line with budget projections, the ministry said.

With last year’s health care spending on track and outlays at the
local level likely below target, notably for investment, the government
is confident that the overall public deficit for 2011 declined to close
to 5% of GDP, well below the official target of 5.4%.

The headstart for this year brings the public deficit target of
4.5% within reach. Although the underlying GDP growth forecast of 0.5%
appears optimistic to most observers, some E4 billion in budget outlays
remain frozen “to deal with the unexpected,” Budget Minister Valerie
Pecresse reassured last month.

However, surveys of voters’ intentions suggest that the current
center-right government will be replaced by a leftist coalition after
the legislative elections in June.

While the leading presidential candidate, Socialist Francois
Hollande, has pledged to respect the standing public deficit target of
3% for 2013, he may be reluctant to take emergency tightening measures
immediately if the economy underperforms.

–Paris newsroom +331 4271 5540; Email: ssandelius@marketnews.com.

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$,MFX$$$]

–Collective Action Clauses To Force PSI On Holders Of E25 Billion

PARIS (MNI) – Participation of private sector creditors in Greece’s
debt exchange offer (PSI) will be 95.7%, which covers E197 billion out
of a total of nearly E206 billion worth of privately held Greek bonds,
the country’s Finance Minister Evangelos Venizelos announced Friday
morning.

This figure includes E152 billion or 85.8% of bonds governed by
Greek law and E20 billion or 69% of bonds under non-Greek law.
Participation of bond holders with the remaining E25 billion will be
achieved through enforcement of collective action clauses that will
force them to accept the terms of the debt swap offer.

The total voluntary participation among all classes of bond holders
– E172 billion out of E206 billion — is 83.5%.

“On behalf of the Republic, I wish to express my appreciation to
all of our creditors who have supported our ambitious program of reform
and adjustment and who have shared the sacrifices of the Greek people in
this historic endeavor,” Venizelos said in a written statement. He
pledged that Greece would continue to implement the budget cuts and
structural reforms to which it has committed.

Those reforms are a condition of further aid from Greece’s official
sector lenders, the EU and the International Monetary Fund. They have
pledged a second bailout package of up to E130 billion for Greece if it
complies with the austerity policies and longer-term reforms demanded.

Another condition official lenders have attached to the second
bailout is successful completion of the PSI deal. Without the new
bailout and the PSI deal, Greece had been expected to default on some
E14.4 billion worth of bonds maturing March 20. But that now seems
unlikely to happen.

The participation rate of 95.7%, though augmented by use of the
collective action clauses, is beyond most expectations and already
deemed a great success. It is likely to be endorsed enthusiastically by
Eurozone finance ministers in a teleconference they are scheduled to
hold this afternoon at 1300 GMT/0800 ET.

France’s Finance Minister Francois Baroin, in a radio interview
this morning, called the PSI result “a beautiful success,” adding that
it “avoids default and thus the risk of a collapse of Greece, [and]
allows us to attain all the objectives we had set.”

Greece’s creditors also waxed enthusiastic. Josef Ackermann,
chairman of Deutsche Bank and of the Institute of International Finance,
which represented banks in the negotiations with Greece, said the PSI
outcome was a “very strong and positive result.” It will provide a
“major opportunity now for Greece to move ahead with its economic reform
program, while strengthening the euro area’s ability to create an
economic environment of stability and growth,” he added.

The reaction from Germany, whose Finance Minister Wolfgang
Schaeuble had resisted a second bailout and pushed for a hard default,
will be key.

Anticipation of a high participation rate had been building over
the last 24-36 hours. The European Central Bank, which had removed Greek
bonds from the list of eligible refinancing collateral after they were
declared in default, said Thursday that it would begin accepting them
again.

Under the terms of the PSI deal, investors would receive 15 cents
on every euro in the form of short-term securities issued by the
European Financial Stability Facility, which are virtually cash
equivalents.

Of the remaining 85 cents, 31.5% would be in the form of newly
issued bonds, which would have lower coupon rates but — in a major
concession to foreign investors — would be subject to English, not
Greek law. The other 53.5 cents would be written off as a loss.

Investors will receive special “GDP warrants” that would entitle
them to additional payments should Greece’s economy outperform
expectations.

Because of the lower coupon rates on the new bonds, the real net
loss on the bonds would be close to 75%. The deal should reduce the
nominal value of Greece’s outstanding debt by more than E100 billion.

There are still some potential pitfalls, including possible legal
challenges from bond holders who are either forced to participate in the
debt reduction scheme or who, declining to participate, receive nothing
for their outstanding bonds.

In a blunt statement earlier this week, Greece’s Public Debt
Management Agency noted that Athens did not have funds available to pay
investors who refused to participate in the PSI deal. That statement was
aimed at the holders of bonds not subject to Greek law, since Athens did
not have the leverage of the collective action clauses to hold over
them.

About 31% of those bond holders, with holdings of roughly E9
billion, have so far either declined to participate in the PSI deal or
not responded to the offer, according to the figures provided by the
Greek Finance Ministry. The ministry noted that their deadline for
responding has been extended to March 23 at 2000 GMT.

“After that,” Venizelos warned, “there will be no further
opportunity for creditors holding those instruments to benefit from the
package of EFSF notes, co-financing and GDP linked securities which form
an important and integral part of our invitations.”

–Paris bureau, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$Y$$$,M$X$$$,MGX$$$,M$$CR$,MT$$$$]

• Possible triggering of CDS already priced in

The official has said “We have been struggling to understand exactly what CACs imply for credit or non-credit events and it is not clear”

Well if it ain’t clear to a bloody Deputy Finance Minister, then what chance we got

He added, if the country’s debt restructuring triggered  credit default swaps “it is not taking anyone by surprise” and “it is already priced in”

• Greek debt take-up is historic opportunity for the country
• Troika will now assess whether debt swap take-up is enough to meet demands of Eurogroup
• Eurogroup will decide in teleconference today how to proceed with Greece

 Reuters reporting.

FRANCE DATA: Jan industry output +0.3% m/m; Dec -1.3% m/m (-1.4%)
–Below expected; MNI analysts survey median forecast +0.5% m/m
–Jan industry output -0.2% vs 4Q average; 4Q -0.9% q/q
–Jan mfg output +0.2% m/m after Dec -1.3% m/m (-1.4%)
–For details see MNI MainWire

FRANCE DATA: Jan central govt deficit E12.5 bln, down E900 mln y/y