Greek Prime Minister Alexis Tsipras and his finance chief pledged to avoid a standoff with creditors as stock and bond markets tumbled on the prospect of a prolonged fight with fellow European governments.
“There will neither be a catastrophic clash, nor will continued kowtowing be accepted,” Tsipras, 40, said on Wednesday, in comments broadcast live. The new Greek leadership “will not be forgiven” if it betrays its pre-election pledges to renegotiate the terms of the country’s bailout, he said.
The new premier convened his cabinet that includes a foreign minister who raised questions over European Union sanctions against Russia and a finance minister who has called Greece’s bailout a trap. Germany warned the Mediterranean nation against abandoning prior agreements on aid, after analysts said that setting Greece on a collision course with its European peers might lead to its exit from the euro region.
The Syriza-led government came to power on a platform of writing down Greek public debt, raising wages and halting spending cuts while remaining in the euro.
“Talks won’t be easy, they never are in Europe,” Finance Minister Yanis Varoufakis, 53, said as he took over from his predecessor. “There will be no duel, no threats, or an issue of who blinks first.”
Greek stocks and bonds slumped for a third day, after new ministers said they will cease the sale of some state assets and increase the minimum wage. Yields on three-year bonds rose 2.66 percentage points to 16.69 percent. The benchmark Athens General Index decreased 9.2 percent to its lowest level since 2012, led by a collapse in the value of banks.
Yields on 10-year bonds rose back above 10 percent after being as low as 5.7 percent in September. In mid 2012, they exceeded 30 percent, the highest since the country’s debt restructuring, the largest in history.
Statements of newly appointed ministers “imply confrontation and tense negotiations in the near future,” Vangelis Karanikas, head of research at Athens-based Euroxx Securities, wrote in a note to clients.
The country has about 330 billion euros ($374 billion) of outstanding borrowings. It has to refinance Treasury bills on Feb. 6 totaling 1 billion euros and another 1.4 billion euros on Feb. 13, according to data compiled by Bloomberg. The government typically would do that mostly through local banks.
An index of Greek lenders dropped to its lowest level since at least 1995, with National Bank of Greece SA, Eurobank Ergasias SA and Piraeus Bank SA declining as much as 30 percent.
“Besides the well-known concerns on the political side there are issues with potential management changes in banks and concerns over liquidity,” said Alexandros Boulougouris, an analyst at Wood & Co. in Athens. “The overall environment is very negative and everybody is waiting to see if the new government will come to some sort of consensus with its lenders.”
Tsipras spoke ahead of a planned visit from the president of the European Parliament, Martin Schulz, in Athens on Thursday, and Jeroen Dijsselbloem, president of the Eurogroup the following day. The Greek government is willing to hold negotiations with everyone, Tsipras said.
After the initial congratulatory notes on Tsipras’s election, euro member states hardened their stance.
“The message ‘we want your support but not your conditions’ won’t fly,” said Dijsselbloem, who is also Dutch finance minister. “My message will be that we’re open to cooperation but that the support from Europe also means the Greeks have to make an effort.”
Rhetoric or Reality?
Whether the government in Athens turns rhetoric into reality will be tested first when Greece’s new foreign minister, Nikos Kotzias, has the opportunity to block further sanctions on Russia at an EU meeting in Brussels on Thursday.
Kotzias, a politics professor and former communist, has advocated closer ties with Russia, spoken out against a German-dominated Europe and, in the 1980s, praised the Polish government’s crackdown on the Solidarity movement.
“Anyone who thinks that in the name of the debt, Greece will resign its sovereignty and its active counsel in European politics is mistaken,” Kotzias said at the ceremony to take over the Foreign Ministry. “We want to be Greeks, patriots, Europeanists, internationalists.”
He’s part of a cabinet named on Tuesday by Tsipras after he formed a coalition with Independent Greeks, a more socially conservative party that also opposes austerity. After winning the election two seats short of a majority, Syriza decided against seeking a deal with To Potami, a new party whose leader has pledged to steer a “European course.”