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.

From the days when monarchs over-borrowed for their mercantile adventures, to Argentina’s recent failure to pay its creditors, countries have long run into trouble paying back what they have borrowed. Spain’s 16th-century king, Philip II, reigned over four of his country’s defaults. Greece and Argentina have reneged on their commitments to bondholders seven and eight times respectively over the past 200 years. And most countries have defaulted at least once in their history. But what precisely happens when countries stop paying what they owe?

Ever since the euro crisis erupted in late 2009 Greece has been at or near its heart. It was the first country to receive a bail-out, in May 2010. It was the subject of repeated debate over a possible departure from the single currency (the so-called Grexit) in 2011 and again in 2012. It is the only euro country whose official debt has been restructured. On December 29th the Greek parliament failed to elect a president, forcing an early snap election to be called for January 25th. The euro crisis is entering a new, highly dangerous phase, and once again Greece finds itself at the centre.