By Simon Miller

European markets have drifted down following eurozone ministers' rejection of private bondholders' offer on Greek debt.

The negotiations between the Greek government and the Institute of International Finance (which represents private debt holders) assumed an average coupon on new Greek bonds of 4% but Eurozone ministers want a lower average coupon or interest rate on new bonds.

The International Monetary Fund has warned that any rate must not be above 3.5% if Greece's debt is to be manageable.

A 4% coupon would see the costs for eurozone countries rise above the €30bn earmarked for sweetening the debt write down for the private sector so ministers have sent the offer back for negotiations according to a spokesman.

Hopes of a deal saw markets close up last night with the FTSE 100 up 0.9% at 5,782.56 while the DAX and CAC 40 in Paris both rose 0.5%, to 6,436.62 and 3,338.42 respectively.

However, markets tracked downwards this morning with the FTSE 100 and CAC 40 trading at 66% down at 5,744.68 and 3,316.38 respectively as of 10.10am GMT.

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