Bailout rescue: euphoria wanes as doubts emerge

The German chancellor, Angela Merkel, said she was confident that the Bundestag would vote through the Greek rescue package. Photograph: John Macdougall/AFP/Getty Images

A rally on European stock markets evaporated on Friday night as investors began to voice concerns about whether the eurozone rescue plan for Greece would be enough to stem the currency bloc's debt crisis.

One leading investment strategist described the new deal as "less sticking plaster and more of a proper bandage", but warned the underlying problems in the Greek economy had not been addressed. Another said the voluntary 21% "haircut" agreed by the banks was less than a third of what was required.

The credit ratings agency Fitch added to worries over the deal after it declared Greece would be in temporary default as the result of the €109bn (?96bn) bailout. The move is likely to be matched by rival ratings agencies.

The FTSE 100 finished up just 35 points at 5935, adding to small gains on the main French and German exchanges following a volatile day that saw most shares sink before a moderate recovery. Markets had initially cheered the deal and pushed up US stock prices overnight.

British and German government bonds, considered a safe haven, ended higher as investors started to have doubts about the scheme, which involves offering Greece, Ireland and Portugal longer to pay off their loans and a cut in interest payments.

Greece was also offered a relatively small one-off reduction in the value of its outstanding loans that will reduce its debt-to-GDP ratio from the 160% it was expected to reach before 2015.

French prime minister Francois Fillon said the deal guaranteed there would be no default by member states in the 17-nation bloc. However, comments by German banking bosses that the deal would need to be examined added to the air of uncertainty.

Germany's BdB association of private banks said that while an agreement was "an important step," the industry needed more information on its involvement.

The Institute of International Finance, which led talks for private investors, said 90% of creditors will sign up. Deutsche Bank, HSBC, BNP Paribas, Allianz and Axa are among the firms ready to support it.

Holders of Greek debt who are not on the institute's list of supportive firms include Royal Bank of Scotland, Italy's Unicredit and the French Credit Agricole banking group.

The offer is voluntary, raising the possibility that some investors, such as hedge funds, will not participate and wait to be repaid at the full price.

Standard Life said the deal was a positive move but it would continue to shun European shares and sovereign bonds, leaving it underweight in both.

Richard Batty, the fund manager's global investment strategist, said the bailout package still failed to tackle the economic situation in Greece and other debt-laden countries: "This programme is less sticking plaster and more of a proper bandage but that still doesn't deal with the underlying issues. You have to make these ex-growth economies like Greece and Italy more productive and able to compete in global markets. Without higher productivity and growth it will prove difficult to pay down debts, even with the improved deal."

Gary Jenkins, head of fixed income research at Evolution, argued the compromise to limit private sector bank losses to 21% was not enough to save Greece from years of austerity: "We have long thought that the most likely outcome for Greek bondholders would be that they would take a small haircut first followed by a larger one at a later date.

"To give Greece a fighting chance they probably need a writedown close to 65%," he said.

Analysts also warned that the need to put the package to a vote in the parliaments of each eurozone member state meant the deal could yet be derailed.

"Some of the euphoria that was in the market as the result of [Thursday's] events has eased off a little bit," said Eric Wand, strategist at Lloyds Corporate Markets.

"Some of the measures that were announced have still got to be passed by national parliaments – particularly with regard to the EFSF [European Financial Stability Facility]. And there may be some concerns about the sustainability of the debt situation given the easing growth backdrop," Wand added.

Germany's Angela Merkel said she was confident the Bundestag would vote through the package after she secured private sector involvement against French fears it would trigger a mass withdrawal of private funds across the eurozone.

France's BNP Paribas is set to take the biggest hit of around €950m, as the largest holder of Greek government debt outside the country.

Fillon said France's debt would increase by €15bn by 2014 taking into account the cost of providing a guarantee. The increase in debt raises the risk that France may overshoot the government's debt targets, which foresee a peak at 87% of GDP in 2012.

Ireland said the reduction in interest rates and extension on much of its lending could save €1bn a year in costs. Prime minister Enda Kenny thanked UK chancellor of the exchequer George Osborne for matching the eurozone plan with a reduction to 3.5% on the interest payments of a separate loan Britain offered last year.

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Stranded pilot whales prompt Highlands rescue operation

A group of pilot whales became stranded in a remote sea loch in Scotland, prompting a rescue mission. Photograph: Charlie Phillips/WDCS/PA

Fifteen pilot whales have died after a pod of 60 became stranded in a remote sea loch in the Highlands. The Whale and Dolphin Conservation Society, which has sent a team to the area near the Kyle of Durness, said there is a chance that the pod is the same one that became stranded in the Outer Hebrides in May, leaving two whales dead.

Rescuers trying to save the whales said they had perished when they were stranded at low tide. Around 35 members of the pod beached as the water in the sea loch receded.

Twenty of them were refloated to deeper water using inflatable pontoons as the water returned, but the remainder had died, the British Divers Marine Life Rescue charity said. Many of the whales had been stranded on their sides, on top of each other and upside down and were breathing in sand.

A further 20 are thought to be in deeper water and not in imminent danger.

Local residents said the whales may have followed sand eels or salmon into the remote bay near Cape Wrath and had become stranded as the tide receded.

One man from a local B&B, who asked not to be identified, said there were six boats in the loch apparently trying to guide the whales towards a narrow channel where they could be kept until the tide rose again. A small number of them had already beached, he said.

"When the tide is out, it goes right back. The Kyle totally dries. It's just a huge expanse of sand … It's happening right in front of us. Two or three of them have beached. It's dreadful."

Danny Groves of the Whale and Dolphin Conservation Society said the pod could be the same one involved in a stranding near South Uist in . In that incident, 60 of the mammals swam into a narrow and rocky sea loch on the island's coast prompting fears that dozens could be killed in a mass beaching. Two were found dead as the pod eventually left Loch Carnan, on the north-east corner of South Uist. A post-mortem examination carried out on one whale suggested it died of infection. Rescuers later said a second whale was found dead in the loch.

At the time, officials in Ireland were warned to watch out for a mass stranding on their shores. The previous year, 35 pilot whales that appeared to be in danger of beaching in Loch Carnan left South Uist intact but less than a week later, 33 of the pod were found dead on a deserted island off County Donegal.

"It could well be (the same pod)," said Groves. May: "That's the group mentality. The last time, back in May, we thought one or two may have been injured. They operate in a very social group. Rather than leave, the others would come in and follow the injured."

Groves said other possible reasons for stranding behaviour could be noise pollution from sonar or drilling. Until a whale died and a post-mortem was carried out, it was difficult to say what the cause might be, he added.

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The fight to rescue the Arab spring

Egyptian protesters wave their national flag and shout slogans in Cairo's Tahrir Square. Photograph: Mohamed Hossam/AFP/Getty Images

The historic revolutions that have rippled through the Arab world this year were in danger of eclipse on Friday night as protesters returned to the streets to profess their disgust at how the movement is being stymied by regimes old and new.

Six months after the Arab spring claimed its first dictator, the main squares of Cairo and Tunis were again alive with protest, teargas and fury at the resistance to change shown by interim authorities. In Syria activists said at least 19 people had been killed in the latest crackdown against protests that have convulsed the country for more than four months. At least seven people were killed in Yemen amid a political limbo that appears no closer to resolution. And in Jordan a heavy security presence policed pro- and anti-reform demonstrations which turned violent.

The scenes served as a reminder that following the euphoria of the Arab spring, little concrete progress towards reform has been made. Elections in Tunisia and Egypt have been postponed. Offers of reform in Yemen and Syria have been rejected as inadequate.

Egypt

Thousands of demonstrators descended on public squares around the country to offer a "Friday of final warning" to the ruling military junta, amid fears that the revolution which toppled Hosni Mubarak is being betrayed by conservative forces.

Rallies and hunger strikes were reported from Alexandria on the Mediterranean coast all the way down to Luxor in the south and Suez in the east, with the main focus once again on Cairo's Tahrir Square where a large sit-in is now over a week old and shows no sign of ending.

Protesters accused the Supreme Council of the Armed Forces (SCAF), which assumed power in the aftermath of Mubarak's fall and promised to make way for a democratically-elected civilian government later this year, of stifling revolutionary demands and working to shield elements of the old regime from grassroots political change.

"As many have been saying on Facebook, the relationship between the people and SCAF is the same as the relationship between a wife and a husband who she knows is being unfaithful," said Shady Alaa El Din, a demonstrator in Tahrir.

"She tolerated it at first in an effort not to destroy the family and hurt the children, but eventually she realised the husband doesn't really care about the family at all, so now she has dropped her act and is taking him on directly," he added.

"At first we lied to ourselves, we wanted to believe they were with us. But now the street has woken up and it is saying to SCAF 'we are the rulers, and you follow our orders – not the other way round. We are the fucking red line, you do not cross us.'"

In common with most protesters, El Din was infuriated this week by an address from SCAF spokesman General Mohsen El-Fangari, in which he warned against those seeking to "disrupt public order" and adopted a tone reminiscent of Mubarak in his final speeches to the nation. Pressure is now mounting on interim prime minister Essam Sharaf, who appears unable or unwilling to force through meaningful policy changes in the face of the generals' intransigence and is now being urged to resign by many of his original supporters.

Tunisia

For anyone new to the Tunisian capital, it was almost as though the past six months had never happened. Balaclava-wearing riot police armed with batons, teargas launchers and dogs squared up against a small crowd of demonstrators who had gathered to express a sentiment widely felt in the city: that the revolution has run into the sand, stymied by a caretaker administration that they say has done little to implement revolutionaries' demands.

The central government square or Qasbah was protected by coils of barbed wire and armoured vehicles, as demonstrators waving Tunisian flags chanted "peaceful, peaceful". Then the trouble started. The first gas canister spewed a thick white smoke and was quickly followed by many others. Protesters ran for cover into dark shadows against a white gas screen.

Two men held their ground, kneeling bare-chested and facing the charging police. A third stopped a canister that whirled past, picked it up and threw it back at police lines. As the fumes dispersed, the demonstrators returned, their numbers now swelled into the hundreds. Some began pelting police with small rocks.

"The people who tortured me are still there," said Malek Khudaira pointing at the ministry where he was held for 10 days during the uprising that toppled the former dictator Zine al-Abidine Ben Ali.

"How can I feel there is change and it's a full revolution if everything is the same, I see those torturers walking in the streets every day."

For hours a game of attack and counter attacked ensued. Demonstrators would march, police would fire hails of canisters into their midst. One man in black trousers, white shirt and sunglasses stood facing the police when they fired a small canister point blank at his belly. He fell where he stood. Others helped him away.

The organisers labelled the event as "the Qasbah 3". Number 1 was the uprising that toppled Ben Ali and forced him to flee and number 2 was the sit-in that toppled the first caretaker government a month later.

Syria

Activists reported at least 19 deaths across Syria and dozens of injuries as people gathered for the main weekly prayers, which have been used as a launching pad for dissent for more than four months.

Heavy clashes took place in parts of the capital, according to activists and state media, who offered widely diverging accounts. At least seven protesters were shot dead in neighbourhoods of Damascus as some of the largest crowds since the uprising poured on to the streets.

Security forces have generally used batons and teargas in Damascus to avoid inflaming protests in the heartland of the regime's power. Elsewhere, scores of wounded were reported in the cities of Aleppo, Deraa, Idleb and Homs.

Syrian officials again blamed armed gangs for the violence – an indirect reference to Islamists who it claims are trying to ignite sectarian chaos. However, activists said unarmed demonstrators were again attacked by soldiers firing live rounds.

The use of violence has been unpredictable, changing by week and location. In Homs, one resident in the well-off neighbourhood of Inshaat said security forces appeared to be trying to avoid deaths. "They have been shooting but seemed to be aiming at the legs rather that the heads."

Two of the biggest protests took place in Hama and Deir Ezzor, on a day when activists estimated that up to 1 million people may have openly defied the regime nationwide.

Jordan

Ten people, mostly journalists, were injured on Fridaywhen Jordanian police tried to intervene in clashes between pro-reform demonstrators and government supporters in Amman.

Hundreds of protesters calling for political changes and an end to corruption gathered in the centre of the capital but it was not clear whether they would ignore official warnings against holding a sit-in of the types seen in Egypt and Bahrain.

Jordan has seen sporadic unrest since January but only on a small scale. Opposition demands – supported by youth groups, civil society organisations and Islamists – are for changes within the framework of the Hashemite monarchy. King Abdullah has pledged to pursue reforms that would allow the formation of future governments based on an elected parliamentary majority but gave no date.

The slogan "the people want the reform of the regime" was in striking and deliberate contrast to demands elsewhere for the "overthrow" of rulers.

The Amman protest was held with a heavy security presence, with police, gendarmerie and special forces surrounding the area, the Ammon News website reported.

Rallies for reform and against "rampant corruption" also drew hundreds of demonstrators in the southern cities of Tafileh, Maan and Karak, and in Irbid and Jerash in the north.

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