Greek efforts calm markets

Greek prime minister Alexis Tsipras’s damage-control efforts calmed investors while failing to budge European policy makers on his week-old government’s key demands.

Officials in Berlin, Paris, and Madrid have rejected the possibility of a debt writedown as they held out the prospect of easier repayment terms, an offer that has been on the table since November 2012.

Greek stocks and bonds rallied following a conciliatory statement issued by the premier on Saturday after markets tumbled.

He promised to abide by financial obligations, a prelude to a tour of European capitals, after finance minister Yanis Varoufakis said the country won’t take more aid under its current bailout and wanted a new deal by the end of May.

That prompted concern of a looming cash crunch and potential default. Varoufakis was in London, meeting chancellor of the exchequer George Osborne and then investors in sessions organised by Bank of America Merrill Lynch and Deutsche Bank.

Tsipras was in Cyprus before trips to Rome, Paris and Brussels, with Berlin not yet on the agenda.

German chancellor Angela Merkel wants to duck a direct confrontation and isolate him, a German government official said.

In Nicosia, Tsipras repeated his finance chief’s call for an end to the committee that oversees the Greek economy. Dismantling the troika is “timely and necessary,” said Tsipras.

The danger is that the Greek financial system is left without funding long before the self-imposed May deadline.

At the moment, the country has a special dispensation from the ECB because it’s considered to be complying with the bailout programme.

That means its debt can be used in central bank refinancing operations even though it is rated junk.

Greek banks, which play a key role in funding the government, lost at least €11bn in deposits in January, according to four bankers who asked not to be named because the data were preliminary.

The outflow accelerated from about €4bn December. Deposits totalled €160.3bn at the end of 2014.

Merkel’s goal is to show Tsipras that he is isolated, the official said.

What’s more, she sees little margin for maneuver on the conditions of any further support for Greece and is skeptical about Tsipras’s claims that he can raise revenue by cutting corruption and increasing taxes on the rich, the official added.

* Bloomberg

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