The financial markets were on edge on Tuesday, as the pressure mounted on Eurozone finance ministers to reach an agreement over Greece’s loan program.
Greek and Eurozone finance ministers resumed talks in Brussels on Tuesday, where a war of words between Greece and Germany escalated, stoking concerns both sides were still far apart on a settlement. The European Union has given Greece until the end of the week to extend its current bailout program or risk losing financial aid. Athens has vowed not to extend the current bailout program and is seeking a six-month bridging loan to finance essential government activities. Greece’s €240 billion bailout program is due to expire on February 28.
Greece’s newly elected Prime Minister Alexis Tsipras said on Tuesday his government would give in to “blackmail” and would instead begin to enact new laws to reverse the bailout conditions. Tsipras told his Syriza party that the government would not compromise with Greece’s troika of lenders.
“We are not in a hurry and we will not compromise,” Tsipras told his far-left party’s lawmakers.
He added, “We are working hard for an honest and mutually beneficial deal, a deal without austerity, without the bailout which has destroyed Greece in recent years, a deal without the toxic presence of the troika.”
German finance minister Wolfgang Schaeuble reiterated his take-it-or-leave-it message, putting the pressure squarely on Athens to extend the troika’s loan program.
“The question still remains if Greece wants a program at all or not,” Schaeuble told reporters in Brussels after a second day of meetings.
Dutch finance minister and Eurogroup president Joroen Dijsselbloem echoed Shaeuble’s words and insisted that Athens seek an extension.
“It’s really up to the Greeks. We cannot make them or ask them,” he stated.
While the prospects of an agreement remain dim, the European Central Bank is not expected to cut off funding to cash-strapped Greek banks this week, according to sources. The ECB insists that Greece will remain part of the euro.
The euro rebounded on Tuesday, as investors disregarded the latest collapse in Greece bailout talks after German investor sentiment reached a 12-month high in February. ZEW’s economic sentiment index climbed 4.6 points to 53.0, as the current situation sub-index more than doubled to 45.5.
The EUR/USD climbed to an intraday high of 1.1445 on Tuesday. It would subsequently consolidate at 1.1394, advancing 0.45 percent.
The euro also rebounded against the British pound, as the EUR/GBP rose 0.54 percent to 0.7426.