Greece

The European Central Bank has reacted to uncertainty over Greece’s future in the euro zone by excluding four of the country’s banks from its regular liquidity-providing operations, The Globe and Mail reported. The move raises the pressure on Greece to stick to its international bailout by highlighting the risk that euro zone central bankers could pull the plug on its financial system. It reflected ECB fears that a planned recapitalization of Greece’s banks could be delayed.

Greece's government said Tuesday that it would honor in full a maturing, foreign-law bond that was not included in the country's recent debt restructuring but said the payment would not necessarily set a precedent, Dow Jones reported. "The Hellenic Republic today announced that it would make timely payment of the principal as well as the interest due on approximately EUR435 million of bonds maturing on May 15," the finance ministry said in a statement. "The decision weighed carefully all relevant factors and implications as well as the current conjuncture," it added.

Greece's future in Europe's common currency was in doubt after a last-ditch effort to form a new government failed and the country's political turmoil sparked a dramatic increase in bank withdrawals, The Wall Street Journal reported. After a week of fruitless negotiations, Greece's political parties couldn't agree on a governing coalition, leaving the country in political limbo until new elections next month. The delay could deprive Athens of badly needed international aid and deepen Greece's economic depression.

Political deadlock in Greece on Monday stoked a renewed sense of crisis about the fate of the European economy as new data confirmed a downturn in one of the world’s major trading blocs, The Washington Post reported. The immediate focus was on the inability of Greek politicians to form a new government after divided elections last week — raising the possibility that the country may yet reject a recent international bailout agreement and leave the euro currency union.

Eurozone central bankers have talked publicly for the first time of managing a possible Greek exit from Europe’s monetary union as stalemate in Athens talks on a coalition government raises the prospect that Greece will renege on the terms of its international bailout, the Financial Times reported. The comments by members of the European Central Bank’s governing council indicate that the risk of eurozone fragmentation is being taken increasingly seriously by the region’s policymakers.

Greek political parties were engaged in a last-gasp attempt to form a government and avoid new elections on Thursday after voters rejected an international bailout and plunged the debt-ridden country into crisis, Reuters reported. Socialist PASOK party leader Evangelos Venizelos is the third and last political leader to try to form a government after Sunday's election, which left pro- and anti-bailout forces balanced almost equally.

Two years after Europe bailed Greece out to protect the euro, the rescue has become a debacle that threatens to unravel the common currency, The Wall Street Journal reported. After Greece's May 6 elections left pro-bailout parties too weakened to govern the country, more elections are likely in June, with no guarantee a stable government will emerge. By next month, Athens must identify €11.5 billion, or $15 billion, in fresh spending cuts or face suspension of the international loans it needs to pay pensions and run schools.

Greece is heading for a clash with international lenders as the radical leftwing party that came second in the weekend’s election called for the ripping up of a “barbarous” austerity programme underpinning its bailout and questions mounted about the country’s future inside the euro, the Financial Times reported.

Greece's election on Sunday is expected to usher in such political instability that officials from the country's major parties are planning another possible election within months. That, in turn, could threaten the viability of Greece's latest bailout package from the European Union and the International Monetary Fund and aggravate the euro zone's financial woes. A nation eager to punish its political establishment for Greece's financial and economic meltdown is set to give the country's two major established parties a drubbing this weekend.

Greece will have to cope with an even deeper recession than expected in 2012, according to the country’s central bank. In a revision to its previous estimate a month ago, it suggests Athens will find it even harder to meet its fiscal targets, meaning yet more pain for the population, the Financial Times reported. The Bank of Greece forecast the economy will shrink by about 5 per cent this year – the fifth consecutive year of contraction – compared with its previous estimate of 4.5 per cent just a few weeks ago.