NEWS

Greek stocks plunge after five-week closure

08/03/2015 06:21 EDT | Updated 08/03/2016 05:59 EDT
Greece's main stock index plunged over 22 per cent as it reopened Monday after a five-week closure, giving investors their first opportunity since late June to react to the country's latest economic crisis.

Greek bank stocks suffered the most, hitting or nearing the daily trading limit of a 30 per cent loss. Markets in the rest of Europe, however, were largely unaffected.

The Athens Stock Exchange and Greek banks were closed on June 29, when the government imposed controls on money withdrawals and transfers to keep a run on bank deposits from causing the financial system to collapse.

Banks have since reopened, while maintaining strict cash withdrawal limits.

Greece is expected to head back into recession in 2015 — after briefly emerging from a six-year contraction — due to the effects of capital controls and months of uncertainty over the country's future in the euro.

A monthly survey of business and consumer confidence, the Economic Sentiment Indicator, fell for a fifth consecutive month in July to its worst level since October 2012.

"The negative development is the result of the sharp deterioration in business expectations in all areas, but also a recent and significant decline in consumer confidence," said the Foundation for Economic and Industrial Research, or IOBE, which conducts the survey.

Weeks to reach deal

Greece is currently in intense negotiations with bailout lenders in an effort to negotiate the terms of a massive new rescue package in the next two weeks.

The country needs to complete the talks and get more loans before Aug. 20, when it has a repayment to make worth more than 3 billion euros to the European Central Bank.

Deputy Finance Minister Dimitris Mardas did not comment on reports that Athens could seek a short-term loan to tide it over in case the talks have to be extended.

"The (negotiation) timetable is truly pressing ... We are preparing for what has been agreed upon, correcting any gaps that may appear," Mardas told private Skai television.

Negotiators from the European Union and International Monetary Fund are seeking faster cuts in early retirement plans set out by the government, and stricter conditions for a tax arrears payment program.

Possible early election

Prime Minister Alexis Tsipras is facing opposition to the new bailout from within his left-wing Syriza party that could force him to call an early election in the fall.

Syriza dissenters are openly calling for a return to the drachma, but failed last week to force an emergency party conference before the bailout negotiations are completed.

"The government has to choose between a humiliating agreement to sign a third bailout, or abandon the agreements reached in Brussels and seek alternatives for a positive course out of this crisis," former welfare minister and prominent dissenter Dimitris Stratoulis said over the weekend.

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