Stock markets fall as euro zone officials consider Greek default

Stock markets across Europe fell yesterday amid reports that senior euro zone officials were for the first time actively considering a possible Greek default, despite Athens insisting that its bailout negotiations remained on track.

A day after the IMF withdrew from the bailout negotiations with Greece citing "major differences", the Athens stock market fell by 6 per cent reflecting increasing fears that Greece will be unable to make a €1.5 billion payment to the IMF on June 30th.

Reuters reported that the eurogroup working group – the officials that prepare the eurogroup meeting of euro zone finance ministers – had considered the implications of Greece defaulting on its €1.5 billion payment to the IMF at their pre-eurogroup meeting in Bratislava on Thursday night.

Focus is now turning to next Thursday's eurogroup meeting of finance ministers in Luxembourg, which will also be attended by IMF managing director Christine Lagarde.

Pressure tactic

Both German chancellor Angela Merkel and European Commission president Jean-Claude Juncker said talks would continue in the run-up to Thursday's meeting, but Greece remained defiant, with a government spokesman reiterating that Greece would not move past its "red line issues"

Dismissing the IMF’s decision to withdraw its representatives from Brussels on Thursday, a Greek official described the move as a “pressure tactic”, and insisted negotiations would continue. Indications the Greek government would send officials to Brussels for negotiations today were not confirmed on the creditors’ side.

Despite Alexis Tsipras securing a meeting with Chanellor Merkel and French president François Hollande on Wednesday night, relations between Greece and its creditors have reached an all-time low over the past 48 hours.

The IMF withdrew its negotiating team and European Council president Donald Tusk, who has generally refrained from commenting on the latest crisis, accused the Greek government of gambling with the country's future in the euro zone following his first official bilateral meeting with Mr Tsipras on Wednesday in Brussels.

A poll for German TV station ZDF revealed increasing resistance in Germany on further leeway for Greece. According to the survey, 51 per cent of Germans want Greece to leave the single currency, with 70 per cent opposed to further concessions for Greece.

Default

Meanwhile rating agency Standard & Poor’s cut its rating on Greece’s four main banks, predicting that they are likely to default within a year if there is no agreement between the country and its creditors. It comes after Moodys downgraded Greece’s credit rating earlier this week.

Greece’s main banks are being kept afloat by the European Central Bank, which is now providing around €83 billion to the Greek banking system.