Greece

In January 2013, as Cypriot banks faced collapse, Jens Weidmann, Germany’s powerful representative at the European Central Bank, made it clear how unhappy he was with the Cyprus bank bailout, the International New York Times DealBook blog reported. It was not the E.C.B.’s job to “fund the gap of any bank runs,” Mr. Weidmann told the central bank’s governing council, according to confidential minutes of the meeting, citing both the Cyprus rescue and the Greek bank bailout in 2012. As depositors yank their savings from Greek banks, the question is being asked if the E.C.B.

Greek bank stocks rebounded as the government moved to contain the fallout from pledges made by its ministers, seeking to downplay the prospect of an imminent clash with creditors. Within 48 hours of the appointment of an anti-bailout cabinet under prime minister Alex Tsipras, stocks in Athens fell to lows not seen since the peak of the debt crisis, with banks, in which Greek taxpayers are the biggest shareholders, losing about $11 billion of their value, the Irish Times reported.

Greek bank shares suffered their worst one day loss on record on Wednesday, as anxiety grew over the new government’s plan to renegotiate Greece’s €240bn bailout, the Financial Times reported. The country’s four biggest lenders saw their stock prices plummet by an average of more than 25 per cent just two days after Alexis Tsipras, leader of leftwing party Syriza, was sworn in as prime minister. It was the third day of double-digit share slides for the banks.

It’s no secret what Yanis Varoufakis thinks Greece should do with its debt. The economics professor at the University of Athens, who announced his appointment as the country’s finance minister in a posting on his personal blog on Tuesday, has been arguing since the beginning of the crisis that Greece should default while staying a member of the euro area, the Irish Times reported. As well as on his website, Mr Varoufakis shares his opinions with 128,000 Twitter followers.

Greece and its creditors veered toward confrontation as its new, leftist government pledged to make good on promises to reverse years of public-spending cuts despite warnings from Berlin and other European capitals that doing so could plunge the country, and Europe, into deeper crisis, The Wall Street Journal reported.

Finland has emerged as the biggest stumbling block to negotiating a new bailout deal with an incoming Greek government, telling its eurozone partners that it will not support debt forgiveness and is reluctant to back another extension of the €172bn rescue, the Financial Times reported. In an interview, Finland’s prime minister said he would give a “resounding no” to any move to forgive Greece’s debts and warned that a new government in Athens would have to stick to the terms of the existing bailout.

Greece’s debt burden is now equal to 177 per cent of the country’s gross domestic product, a level many economists regard as unsustainable. The unpopularity of the swingeing austerity required to service it has propelled the radical left Syriza party with its promise of debt restructuring into pole position ahead of snap elections on January 26, the Financial Times reported.

Many investors are worried that an election later this month may produce a new radical government in Greece. Alexis Tsipras, the leader of an unruly band of left-of-center political parties, is favored to win on Jan. 25. He has talked of restructuring Greece’s debt and rolling back harsh austerity measures, and has raised questions about the conduct and management of Greece’s sickly banks.

Europe has returned to the signature brinkmanship of the debt crisis that brought its currency union close to collapse five years ago: France and Germany are again warning Greece it is putting its eurozone membership at risk, The Wall Street Journal reported. With a Greek election looming this month, and a party hostile to European-imposed austerity apparently poised to win, French President François Hollande on Monday raised the possibility of Greece exiting the 19-member bloc—departing from the traditional stance that euro membership is irrevocable.

Germany has insisted that it expects Greece to stay in the eurozone, despite a news report claiming Berlin was ready to see Athens quit the common currency if the populist Syriza party wins this month’s snap election and reneges on the country’s reform programme, the Financial Times reported.