The Athens stock market continued its steep slide, and interest rates on Greek bonds spiked further, as investors anticipated difficult negotiations between the new Syriza-led government in Greece and the country's creditors.
Prime Minister Alexis Tsipras told his new cabinet on Wednesday that he would move swiftly to negotiate debt relief, but would not engage in a confrontation with creditors that would jeopardise a more just solution for the country.
"We are ready to negotiate with our own plan," he told his ministers. "We will not seek a catastrophic solution, but neither will we consent to a policy of submission."
Later, the new finance minister, Yanis Varoufakis, appeared to harden the tone, saying that Greece's bailout deals were "a toxic mistake" and that the new government was determined to change the logic of how the crisis had been tackled.
Varoufakis said the new government would seek a "Pan-European New Deal" that would be a bridge between previous agreements and a new arrangement with creditors, although he did not elaborate on what such a plan would look like.
While many Greeks were hopeful that Tsipras would follow through with even a fraction of his populist promises, investors were more rattled.
The Athens Stock Exchange, which already had billions of euros in value wiped out during Greece's election campaign, fell 9.2 per cent on Wednesday after slumping around 11 percent on Tuesday. Shares in financial companies in Greece plummeted: Piraeus Bank shed 29.3pc, Alpha Bank lost 26.8pc, Eurobank Ergasias dropped 25pc and National Bank of Greece closed down 25.5pc..
The interest rate on Greek 10-year government bonds increased on Wednesday nearly 1 per cent, to about 10.2 per cent, with investors apparently wary of a possible debt restructuring. The yields were at 8.4 per cent before the election and below 6 per cent for most of the summer, as the Greek economy appeared poised to grow again under the prime minister at the time, Antonis Samaras.
European Union officials also outlined a tough-sounding position on Wednesday before what would no doubt be long negotiations over the terms of Greece's bailout and an effort by the new government to reduce the country's mountain of debt.
Since 2010, the so-called troika of lenders - the European Central Bank, the European Commission and the International Monetary Fund - has extended Greece two bailouts worth €240 billion.
The vice president of the European Commission, Jyrki Katainen, said that Brussels was eager to start talks with Greece. But noting that he saw no majority in favor of writing off any Greek debt, he added: "We expect them to fulfill everything that they have promised to fulfill."
He emphasised that Brussels could not simply look at the popular anti-austerity excitement surrounding the Greek elections, but that he had to take into account the wishes of people in other countries, including Finns and Germans who were not inclined to give Greece a penny more. "We don't change our policy according to elections," he said.
Katainen's remarks suggested Brussels' opening bargaining position, and they did not necessarily mean that European officials would not offer concessions. But they put the heat on Athens, especially since there is not much time to reach a deal: Greece's current European bailout, already extended, ends in late February unless there is another extension.
"We need to start working together very soon because the commitments have not changed and time is running out," Katainen told reporters.
Asked whether Greece would be able to persuade creditors to write off some of its debt, Katainen said he thought this this was a nonstarter, at least in the Eurogroup, a grouping of finance ministers from the 19 countries, including Greece, that use the euro.
"It would be difficult to see that there would be a majority in the Eurogroup supporting a haircut in Greek debt," said Katainen, a former prime minister of Finland, which has strongly supported Germany in demanding that Athens pay its bills.
In the cabinet meeting on Wednesday, Tsipras set out his government's top priorities in order: tackling what he called the country's humanitarian crisis; stimulating the economy so it could start growing sustainably; entering into a new negotiation with creditors aimed at finding a "mutually beneficial solution to the debt"; creating a "fairer" tax system; and confronting vested interests and corruption "that no one has had the guts to go against".
He also vowed to end what he called a regime of cronyism, in which past governments would "negotiate with the rich, but not to the benefit of the poor".
Varoufakis said he would reduce costs at the Finance Ministry by having fewer advisers. He also pledged to rehire about 600 cleaning employees who were replaced last year by a private firm that the previous government claimed cost less.
Tsipras, whose left-wing Syriza party formed a coalition on Monday, a day after elections, told his cabinet on Wednesday, "Our aim is to show solidarity towards the weakest and to restore dignity to society." He noted that his government wanted to "allow the small business that is drowning in debt and facing bankruptcy to get back on its feet while also relieving citizens hit by unemployment".
Tsipras and Varoufakis plan to meet with Jeroen Dijsselbloem, president of the Eurogroup of European Union finance ministers, in Athens on Friday. This week, Dijsselbloem warned that there was "very little support for a write-off" of Greece's debts. Martin Schulz, the president of the European Parliament, is also scheduled to visit Tsipras this week in Athens.
Adding to the uncertainty was a report that Tsipras had basically frozen Greece's privatisation program, which had been a central demand of creditors in approving the country's international bailouts. The troika had expected Greece to raise tens of billions of euros to pay its debts by privatising state assets.
But the country's new energy minister, Panagiotis Lafazanis, told Greek television that the government was immediately halting plans to privatise a public power company. It was also delaying the sale of a portion of Piraeus Port, one of the most strategically placed in the Mediterranean, to the Chinese state-owned company Cosco, which already owns half of Piraeus and had recently signed an agreement to start expanding cargo capacity on the other half of the port.
Tsipras said he was well aware of the high expectations for him in Greece, and the heavy responsibility his government shouldered. He suggested that the rousing messages of support he had received from leaders in numerous countries, from Russia to France to Spain, signalled that compromise was possible.
"The country is lifting up its head, assuming global significance, attracting international interest," he added. "Greece is regaining its self-confidence and building alliances that will allow it to set its own agenda at the European table."
"We have no time to delay," he added. "There is no room for mistakes."
New York Times
