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Greece: Euro recovers after hitting 11-year low on Syriza victory Greece: Euro finance chief warns about debt write-off
(about 2 hours later)
The euro recovered from an 11-year low against the dollar as investors digested what Syriza's election victory in Greece meant for the eurozone. Greece's new government will find little support among eurozone policymakers for a debt write-off, a senior finance chief has said.
Europe's main share markets also rose - after initial falls - on hopes that a compromise over Greece's bailout terms might be found. Jeroen Dijsselbloem, who heads the eurozone finance ministers' group, said Greece must "stick to the rules".
Syriza wants to renegotiate the €240bn bailout and slow the austerity cuts. Speaking before a Eurogroup meeting on Monday, he said; "There is very little support for a write off in Europe."
Syriza leader Alexis Tsipras said he wanted negotiation, not confrontation, with Greece's international lenders. It followed anti-austerity party Syriza's election win, which initially sparked big falls on financial markets.
The euro earlier fell to an 11-year low against the dollar, while the Athens stock market fell more than 5%. The markets had recovered by mid-morning, with the main share indexes in London, Paris and Frankfurt also reversing earlier falls on hopes that a compromise over Greece's bailout terms might be found.
Syriza wants to renegotiate the €240bn bailout and slow austerity cuts.
But the party's leader Alexis Tsipras helped calm investors' nerves when he said in a speech that he wanted negotiation, not confrontation, with Greece's international lenders.
"The new Greek government will be ready to co-operate and negotiate for the first time with our peers a just, mutually beneficial and viable solution," Mr Tsipras said."The new Greek government will be ready to co-operate and negotiate for the first time with our peers a just, mutually beneficial and viable solution," Mr Tsipras said.
The troika of lenders that bailed out Greece - the European Union, European Central Bank, and International Monetary Fund - imposed big budgetary cuts and restructuring in return for the money.The troika of lenders that bailed out Greece - the European Union, European Central Bank, and International Monetary Fund - imposed big budgetary cuts and restructuring in return for the money.
But Mr Tsipras said: "The troika for Greece is the thing of the past."But Mr Tsipras said: "The troika for Greece is the thing of the past."
However, Mr Dijsselbloem, the Dutch finance minister and chairman of the Eurogroup, told reporters on arriving in Brussels for a meeting of finance ministers: "The most important thing is that if you remain in the eurozone you stick to the rules we have. That's true for all countries.
"There has been a lot of easing of the debt already. In the coming years the interest for Greece will be very low. They get a lot of time to pay back loans so the question is whether more has to be done there," he said.
'Stand-off'
The euro briefly fell as low as $1.1088, the lowest level against the dollar in more than 11 years, but in mid-morning trading was 0.4% higher at $1.125.The euro briefly fell as low as $1.1088, the lowest level against the dollar in more than 11 years, but in mid-morning trading was 0.4% higher at $1.125.
The euro had already been under pressure following last week's announcement of a new stimulus programme by the European Central Bank.The euro had already been under pressure following last week's announcement of a new stimulus programme by the European Central Bank.
In mid-morning trading, stock markets in Paris and Frankfurt were about 0.5% higher, while London's FTSE 100 was up 0.2%. In Athens, the main share market fell 5% at the open, with banks hardest hit. But the index recovered to trade about 1% lower.
"The expectation that there will be a government formed today and (that) we will avoid a second round of elections should provide support," said Constantine Morianos, head of Athens-based Asset Wise Capital Management.
Yields on Greece's 10-year government bonds rose 19 basis points to 8.95%, but are still below the level before last week's ECB stimulus programme was announced.Yields on Greece's 10-year government bonds rose 19 basis points to 8.95%, but are still below the level before last week's ECB stimulus programme was announced.
However, yields on 3-year bonds rose much more sharply, up 68 points to 10.89%. The rise reflects investors' concerns about short-term risks of a debt restructuring over the coming months. However, yields on three-year bonds rose much more sharply, up 68 points to 10.89%. The rise reflects investors' concerns about short-term risks of a debt restructuring over the coming months.
'Stand-off'
Greece's current bailout programme ends in February, and economists say a short-term deal will be negotiated, although difficult talks lie ahead. Germany has indicated that it is not prepared to renegotiate the bailout terms, raising the prospect that Greece could end up leaving the eurozone.Greece's current bailout programme ends in February, and economists say a short-term deal will be negotiated, although difficult talks lie ahead. Germany has indicated that it is not prepared to renegotiate the bailout terms, raising the prospect that Greece could end up leaving the eurozone.
"There is a danger of a prolonged stand-off with the troika as Syriza attempts to negotiate some form of official debt restructuring while not reneging on its promises to voters to cut taxes, raise government spending and increase the minimum wage," said Jonathan Loynes, chief European economist at Capital Economics."There is a danger of a prolonged stand-off with the troika as Syriza attempts to negotiate some form of official debt restructuring while not reneging on its promises to voters to cut taxes, raise government spending and increase the minimum wage," said Jonathan Loynes, chief European economist at Capital Economics.
Michael Hewson, chief market analyst at CMC Markets, said: "Tsipras's comments don't appear to leave any room for doubt as he stated that the troika and the bailouts belong to the past,.Michael Hewson, chief market analyst at CMC Markets, said: "Tsipras's comments don't appear to leave any room for doubt as he stated that the troika and the bailouts belong to the past,.
"You can be almost certain that these negotiations will be watched carefully by the anti-austerity movements in Spain, Portugal, Italy and France to see what measures if any Greece is able to get out of EU politicians to deal with the problem of Greece's debt, and the terms of the bailout programme.""You can be almost certain that these negotiations will be watched carefully by the anti-austerity movements in Spain, Portugal, Italy and France to see what measures if any Greece is able to get out of EU politicians to deal with the problem of Greece's debt, and the terms of the bailout programme."
The UK Chancellor, George Osborne, urged all sides to "act responsibly" in any forthcoming negotiations over Greece's bailout terms. He told BBC Radio 4's Today programme that he understood why, with the Greek economy in trouble, voters were "looking for other answers".The UK Chancellor, George Osborne, urged all sides to "act responsibly" in any forthcoming negotiations over Greece's bailout terms. He told BBC Radio 4's Today programme that he understood why, with the Greek economy in trouble, voters were "looking for other answers".
But he warned that Syriza's election promises to spend more on public services and slow the pace of cuts were unlikely to work. "If you take at face value all the things that the new Greek government has promised, including big increases in public expenditure, I think that will be very difficult to deliver," he said.But he warned that Syriza's election promises to spend more on public services and slow the pace of cuts were unlikely to work. "If you take at face value all the things that the new Greek government has promised, including big increases in public expenditure, I think that will be very difficult to deliver," he said.