Shares fall as bailout talks stall

Published: Friday 12th June 2015 by The News Editor

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Stark warnings to Greece over its stalled bailout talks have hit shares hard, with the main Athens index down 4% within an hour of opening.

The drop comes a day after the International Monetary Fund pulled its negotiators out of the talks in Brussels, saying there had been no progress and that major differences remained in key issues.

The move contrasted with optimism expressed by the Greek side that a deal is possible by the end of the month. Greece’s 240 billion-euro bailout expires on June 30, at which point the country will lose access to the rescue loans it needs to repay debts and avoid a default that could force it out of the euro.

The news also weighed on European markets, with most indexes in the region down. Germany’s DAX, for example, was 0.4% lower. The euro has also fallen sharply, trading 0.7% lower.

“The IMF unexpectedly blew a giant hole in the recent optimism,” said Michael Hewson, chief market analyst at CMC Markets.

It looks increasingly like next week’s meeting of eurozone finance ministers in Luxembourg could prove decisive in sealing Greece’s financial fate.

On Thursday, European Union President Donald Tusk warned Greece there was “no more time for gambling. The day is coming, I’m afraid, that someone says the game is over”.

He said the June 18 meeting “is really crucial and should be decisive”.

Even though the IMF pulled out of the talks, discussions are set to continue over coming days.

German Chancellor Angela Merkel said it is important to continue with the talks. “Where there’s a will, there’s a way, but the will must come from everybody,” she said in a speech in Berlin.

Greece’s creditors – its fellow eurozone states and the IMF – want the country to commit to new economic reforms before they disburse the last 7.2 billion euro left in Greece’s bailout fund.

The final instalment has been pending since last year and with no access to the international borrowing market, Greece has been struggling to pay both its international debts when they fall due, and to continue paying salaries and pensions.

Without outside help, it is unlikely Athens will be able to repay a roughly 1.6 billion-euro debt instalment due to the IMF on June 30 and larger debts due to the European Central Bank in July and August.

“We are coming to a head, and that the situation will change fundamentally in the coming couple of weeks,” said David Mackie of JP Morgan.

“Our judgement remains that Greece will offer concessions to get a deal. The Greek position deteriorates dramatically beyond the end of June, as capital controls would likely make the political and economic situation in Greece even more difficult than it is now.”

Published: Friday 12th June 2015 by The News Editor

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