Fri | Dec 2, 2016

Markets unnerved by Greek leader's tough talk on bailout

Published:Tuesday | February 10, 2015 | 12:00 AM
AP Greece's newly elected prime minister, Alexis Tsipras.

Investors hammered Greece's markets Monday after the country's new government renewed a pledge to seek bailout debt forgiveness and dubbed the rescue package a "toxic fantasy" - comments that presage a clash with European lenders at high-stakes meetings this week.

Amid wider European losses, Greek shares closed down 4.75 per cent after dropping as much as six per cent, continuing a negative run. And borrowing rates were back up, a sign investors are more worried about a sovereign default. The yield on the country's three-year bonds spiked above 18 per cent.

Finance Minister Yanis Varoufakis dismissed the €240 billion (US$270 billion) bailout packages crafted by Greece's lenders as a "toxic fantasy" that had always been doomed to fail.

"The time has come to say what officials admit when the microphones are turned off and say out in the open. ... At some point, someone has to say no and that role has fallen to us, little Greece," he told parliament.

Greece's left-wing Syriza party won the January 25 election on a pledge of bringing relief to Greeks, who have suffered through six years of recession and a dramatic drop in living standards. But since the party took office, Greece has suffered a ratings downgrade and a decision by the European Central Bank not to accept its bonds as collateral.

Markets were hit after Prime Minister Alexis Tsipras, in his inaugural speech in parliament late Sunday, described his election pledge to seek debt restructuring as "irrevocable".

"Greece's new Prime Minister Tsipras gave a few hints that the reality shock after a week of European meetings has started to reach Athens," said Christian Schulz, an economist with Berenberg Bank in London. "But the policy programme presented still reads more like a unilateral tearing up of the conditions under which Athens received ... aid."

Greece faces a grilling at an emergency meeting of eurozone finance ministers to discuss the Greek situation in Brussels on Wednesday, with fears of a chaotic currency exit returning.

British Prime Minister David Cameron chaired a meeting of central bank and government finance officials and later tweeted: "Given uncertainty around Greece and the euro, it was important I chair a meeting to ensure the government is prepared for all eventualities."

On Monday, Tsipras travelled to Austria to meet the country's chancellor, Werner Faymann, who insisted the priority was to avoid any common currency break-up.

"Let me make it very clear that there's unity about that our goal can only be that all members of the eurozone stay members of the eurozone this year and next year and for the coming years," Faymann told a joint news conference.

Tsipras' new government - which ousted the less-confrontational conservatives - argues that Greece's debt will be increasingly unsustainable unless it receives generous repayment relief that would allow its battered economy to recover.

"It appears the new government does not yet have a roadmap for the economy," said conservative lawmaker Christos Staikouras. "That has created a great deal of turbulence."

Parliament is schedule to give Tsipras' coalition a vote of confidence later tonight, Tuesday.

- AP