90 seconds at 9 am with BNZ: Greek crisis deepens as default nears; EU nations agree budget deal; US consumer confidence slumps; US house prices down

Here's my 90 seconds at 9 am summary of the overnight news that matters in 90 seconds at 9 am in association with Bank of New Zealand, including news Greece is shuffling ever nearer to an uncontrolled debt default unless it can strike deals with its donors and its creditors this week.

Yet again overnight there was lots of talk of 'making progress' and nearing a deal without actually doing a deal.

It emerged overnight that Greece will now need an even bigger bailout from its European Union, European Central Bank and International Monetary Fund donors than the €130 billion package agreed in October. This was itself a second rescue package after a €110 billion package deal done in 2010.

Speculation is swirling that Greece now wants a deal worth more than €150 billion as well as an even tougher haircut deal for private creditors than the one apparently (almost) done several weeks ago for a 69% haircut. Greece is locked in an austerity debt spiral. It needs to boost economic growth to pay off its debt burden, but it is cutting government spending and increasing taxes, which is contracting the size of the economy. It seems like a Catch 22 situation with no way out except for default on March 20 and a possible exit from the Euro, or yet another bailout from Germany.

The problem is the Germans are sick to death of bailing out the Greeks and have talked in recent days of imposing an overseer within the Greek government to keep its budget cuts and tax increases on track. Greece's gridlocked government of competing interests has failed to follow through on its promises to raise taxes in particular. See more here at Bloomberg.

See a detailed description of the problems in Greece here at this blog by a Greek crime novelist.

Greece's leaders say deals must be finalised by the end of this week or Greece will fail to repay bonds due at March 20.

Meanwhile, the lack of a Greek deal overshadowed news overnight of a budget compact signed by all the Eurozone nations and eight of the non-euro European Union nations (except for Britain and Czech Repuplic). The deal signed at the 16th crisis meeting of European leaders in less than two years is for tighter rules on budget deficits and the creation of a 'firewall' rescue fund designed to stop the sovereign debt contagion spreading from Greece.

The trouble for this latest deal is that France's President Nicholas Sarkozy also said it would not be ratified until after Presidential elections in April and May, which Sarkozy would lose on current poll rankings. The likely winner from France's Socialist Party, Francois Hollande, has said he wants to loosen the austerity restrictions if elected.

The other problem is the contagion has already spread to Portugal, which is sliding into its own debt spiral. Markets now see a 73% chance of a Portugese default.

European stocks rose slightly on the news of the fiscal compact, but US stocks were down around 0.5% in late trade after some weak economic figures.

Poor US data

US consumer confidence unexpectedly fell and a survey of business activity was also surprisingly weak. See more here from Bloomberg on consumer confidence and the ISM survey.

US economic and jobs figures have improved in recent months, fueling hopes the world's largest economy may be starting to pull out of its four year long slump. But these latest figures are renewing jitters and adding ammunition to those calling for a third round of Quantitative Easing (QE) or money printing by the US Federal Reserve later this year to boost the economy.

Elsewhere, US house prices were down 3.7% in November from a year ago, which was worse than expected. See more here at Bloomberg.

The New Zealand dollar was solid overnight around 82.5 USc. Markets will be watching Chinese factory orders figures this afternoon, along with Australian factory orders and house prices. See more here in BNZ's currencies report on our site.