Euro zone, Greece face off as markets take fright

Mon Feb 9, 2015 1:23pm EST
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By Lefteris Papadimas and Gernot Heller

ATHENS/ISTANBUL (Reuters) - Greece and its euro zone partners engaged in brinkmanship on Monday, with leftist Prime Minister Alexis Tsipras insisting his country would not extend its reform-linked bailout and Germany saying it would get no more money without such a program.

European Commission President Jean-Claude Juncker warned Greeks not to expect the euro zone to bow to Tsipras' demands in a growing confrontation which spooked financial markets and prompted U.S. and Canadian pleas for calm and compromise.

Escalating the rhetoric, Greece's finance minister said the euro zone could collapse "like a house of cards" if Athens were forced out.

A Greek finance official said he did not believe Juncker, IMF chief Christine Lagarde or German Chancellor Angela Merkel would let Greece go bankrupt, but Merkel said Greece needed to come up with a sustainable proposal.

"I think what counts is what Greece will put on the table," Merkel said at a news conference in Washington.

Tsipras set out plans on Sunday to scrap Greece's "cruel" austerity program, ruled out any extension of its 240 billion euro EU/IMF bailout, which runs out at the end of this month, and vowed to seek reparations from Germany for World War Two.

His uncompromising maiden policy speech to parliament triggered a further slide in Greek bank stocks to near record lows and a sharp spike in government bond yields, sending wider jitters around Europe's financial markets.

Visiting Austria on Monday, Tsipras said he was confident of striking a compromise with European partners in the coming days and renewed his appeal for a "bridge" arrangement until June to allow time to negotiate a restructuring of Greece's debt.   Continued...

Greek Prime Minister Alexis Tsipras is pictured on newspapers at a kiosk in Athens February 9, 2015. REUTERS/Alkis Konstantinidis