Greek stocks fall as EU talks stall

17 February 2015 Last updated at 11:25

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Yanis Varoufakis: "We are ready and willing to do whatever it takes"

Greece's stock market fell by more than 4% at its open after European finance ministers failed to reach a new deal to restructure the country's debts.

Greek bank shares fell almost 9%, while the government's borrowing costs rose, with the yield on a 10-year sovereign bond rising 82 basis points to 10.74%.

On Monday night, Greece rejected a plan to extend its €240bn (£178bn) bailout.

Greek Finance Minister Yanis Varoufakis called the EU deal "absurd" and "unacceptable".

But Mr Varoufakis declared he was ready to do "whatever it takes" to reach agreement over Greece's bailout, despite the collapse of the talks.

And he said he was prepared to agree a deal under different conditions.

The Greek stock exchange recovered some ground as the day progressed, but at midday on Tuesday in Athens, it was still 2.25% lower.

Stock exchanges across Europe all fell in morning trade before recovering.

Germany's main index, the Dax, was 0.35% lower and France's blue chip index, the Cac-40, down 0.19% at mid-day.

In the UK, which has less exposure to Greece's debt woes, the FTSE 100 Index which also started the day lower, had risen 0.45% by lunchtime.

US investment bank JP Morgan claimed over the weekend that €2bn worth of deposits was flowing out of Greek banks each week and estimated that if that were to remain the case, they would run out of cash to use as collateral against new loans within 14 weeks.

JP Morgan's estimate is based on a calculation that a maximum of €108bn of deposits is left in Greek banks.

The most up-to-date figures from the Greek central bank show deposits dropped 2.4% month-on-month in December to €160.3bn from €164.3bn, marking the third monthly fall in a row.

Deadline

Dutch Finance Minister Jeroen Dijsselbloem, who is also chairing the Eurogroup meetings of eurozone finance ministers, warned on Monday night there were just days left for talks.

Mr Dijsselbloem said it was now "up to Greece" to decide if it wanted more funding or not.

Ahead of Tuesday's meeting, he said: "I hope they [Greece] will ask for an extension to the programme, and once they do that, we can allow flexibility, they can put in their political priorities.

"Of course, we will see whether their programme remains on track. But that is the way forward. It's really up to the Greeks. We cannot make them or ask them. It really it really is up to them. We stand ready to work with them, also [over] the next couple of days."

Greece's current bailout expires on 28 February. Any new agreement would need to be approved by national governments, so time is running out to reach a compromise.

Without a deal, Greece is likely to run out of money.

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On Tuesday morning, Luxembourg's Finance Minister, Pierre Gramegna, called for a greater degree of compromise on both sides.

"We can't remain in a blockade, so everyone has to move a bit, water down demands, so we can find a compromise. There are flexibilities in the programme, we have to make use of them," he said.

"When the Greeks are against the programme and don't want to work in this framework, it will be tough."

Mr Varoufakis said on Tuesday ministers would "continue to deliberate", in order to enhance the chances of a deal.

He added he wanted to achieve "a very good outcome for the average European. Not for the average Greek, the average Dutch person or the average German".

"We know in Europe how to deliberate in such a way as to create an honourable solution out of an initial disagreement," Mr Varoufakis said.

But he dismissed talk of "some flexibility" in the programme as "nebulous" and lacking in detail.

Analysis: Theo Leggett, BBC business reporter:

The apparent deadlock in Brussels is hardly surprising, because the two sides have very different goals.

The Greek government wants to scrap the current bailout deal, because of the very painful programme of spending cuts and other austerity measures that come with it. Instead, it wants a bridging loan to help it meet its short term needs, while a new deal is hammered out. Having been elected on an anti-austerity ticket, it can't afford to back down, or it will be accused of betraying Greek voters.

But other members of the eurozone, and Germany in particular, have a very different agenda. They want Greece to accept an extension to the current deal - with the rather uncertain promise of "flexibility" if it plays ball.

They don't want to show any signs of weakness, because of the signal that could send to anti-austerity movements in countries such as Spain, Portugal or Cyprus.

It would also be politically toxic in Germany, where many voters dislike the idea that they are paying for Greece's mistakes.

That doesn't mean a compromise is impossible. It simply means any deal would have to be presented as both an end to the current austerity programme and a continuation of it. A political fudge, in other words - and Brussels has plenty of experience in putting those together. So a short-term solution is possible, but far from certain.

Key dates for Greece - and the eurozone

28 February	Current programme of loans ends
First quarter of 2015	Greece's funding needs estimated at €4.3bn by end of March
19-20 March	EU leaders' summit
20 July	€3.5bn bonds held by the European Central Bank mature
20 August	€3.2bn bonds held by the European Central Bank mature

Before Monday's meeting, German finance minister Wolfgang Schaeuble had already said he was not optimistic a deal would be reached.

"The problem is that Greece has lived beyond its means for a long time and that nobody wants to give Greece money any more without guarantees," he said.

Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds.

The second part of the plan would see the county's debt refinanced. Part of this might be through "GDP bonds" - bonds carrying an interest rate linked to economic growth.

Greece also wants to see a reduction in the primary surplus target - the surplus the government must generate (excluding interest payments on debt) - from 3% to 1.49% of GDP.

In Greece last week, two opinion polls indicated that 79% of Greeks supported the government's policies, and 74% believed its negotiating strategy would succeed.

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