Stocks drop as Greek standoff continues

Greek bond yields rose sharply yesterday while the Athens stock market fell by 5 per cent as the standoff between Athens and its international lenders appeared to intensify, ahead of key meetings on the Greek bailout in Brussels this week.

Government bond yields rose by up to 3.7 percentage points, with three-year yields nearing 22 per cent, as markets took fright at continuing acrimony between Athens and its international lenders.

Confidence

Speaking in Vienna following a meeting with Austrian chancellor

Werner Faymann

, Greek prime minister

Alexis Tsipras

expressed confidence that a deal could be negotiated with Greece’s EU partners.

"There is a common desire to resolve this crisis. I am optimistic that we will reach a compromise with our European partners," he said. But he also reiterated his call for "bridging loans" for Greece following the expiration of its bailout on February 28th, a proposal that has been dismissed by the head of the eurogroup and by German officials, who have been pressing Athens to request an extension of the bailout programme.

Speaking in Washington, German chancellor Angela Merkel said that Greece needed to come up with a sustainable proposal. "I think what counts is what Greece will put on the table," she said at a news conference alongside US president Barack Obama.

Speaking at a G20 meeting in Istanbul, Germany’s finance minister Wolfgang Schäuble said that if Athens wanted a bridging deal, it would need an internationally supervised reform programme.

“Without a programme, things will be tough for Greece. I wouldn’t know how financial markets will handle it without a programme – but maybe he knows better,” he said.

Mr Tsipras struck a defiant tone in an address to the Greek parliament on Sunday, pledging to reverse a number of the economic reforms imposed during the four-and-a-half year rescue programme.

Debt renegotiation

European Commission officials said that no debt writedown was under consideration for Athens, although some form of debt renegotiation may be considered when euro zone finance ministers gather for an emergency meeting in Brussels tomorrow night to be attended by Greek finance minister

Yanis Varoufakis

. The meeting takes place on the eve of an EU leaders’ summit, which is expected to be dominated by the continuing Greek standoff as well as the crisis in Ukraine. The eurogroup of finance ministers are due to meet again next Monday for a scheduled meeting.

As the standoff continued, European Commission president Jean-Claude Juncker toughened his language on Greece. Speaking ahead of talks with Germany’s Social Democrat party, he warned the Greek government not to assume that the euro zone would simply accept all the promises made by Mr Tsipras on economic reform.

He said Tsipras had “only partly addressed” Brussels’ concerns about his plans in his speech in Athens on Sunday.

“Greece should not assume that the overall mood has so changed that the euro zone will adopt Tsipras’s government programme unconditionally,” Mr Juncker said.