Greece is bullish but the markets brace for a major default

 

New York

World leaders piled pressure on eurozone countries to resolve the area's sovereign debt crisis after a meeting of the International Monetary Fund that revealed more dissent than determination and left financial markets with further troubling news and rumours to digest.

The head of the IMF, Christine Lagarde, was due to meet the Greek Finance Minister, Evangelos Venizelos, last night to press for further austerity measures aimed at reducing the country's debts, and Mr Venizelos publicly declared that "no Greek paper will ever go uncovered".

But behind the scenes, talks about a possible government default were also being stepped up.

Member countries of the IMF said at the weekend that they would act collectively and decisively to get through a "dangerous phase", but the communiqué contained no new measures and acknowledged the "different national circumstances" of its members.

There was also concern yesterday about whether the IMF had the resources necessary to tackle any fall-out from a Greek default, should it trigger a wider financial crisis and threaten the solvency of other, bigger governments. The organisation, which acts as lender of last resort for struggling governments, is reviewing whether to ask for additional contributions from its members, but the review will not conclude until April.

Rumours circulating around the IMF conference in Washington suggested Greece could default on as much as half of its €350bn sovereign debt, a larger figure than the markets expected. Traders are predicting another volatile week for equity, bond and currency markets amid the uncertainty.

At the IMF conference, there were sharp differences and sometimes stinging words between the players. The Swedish Finance Minister, Anders Borg, told reporters: "There is some risk of market disappointment due to the fact there were no further, more specific pledges from the euro countries at this time."

And several other members rounded on the European Central Bank, urging it to do more to prevent a Greek default from spreading by supporting the debt of other eurozone countries and strengthening the private banks that stand to lose billions from a default.

Tim Geithner, the US Treasury Secretary, said: "The threat of cascading default, bank runs and catastrophic risk must be taken off the table." A senior Chinese official questioned whether eurozone democracies were culturally and politically capable of restoring order. "The issue is whether Europe can make a decision," said Gao Xiqing, president of the state-owned China Investment Corp. "You come down to the ultimate question: Can you pull it off? Culturally, you need to change your way of living and ... way of spending."

Ms Lagarde, meanwhile, urged China to play a part by rebalancing its economy from exports to domestic demand.

Participants fear that the woes of the eurozone could push the world economy into a new recession, and the urgency of resolving the sovereign debt crisis was underscored by more disappointing economic news. Portugal's government said the country's economy would contract more sharply this year than it had previously expected and, in Britain, a ComRes survey of 138 business leaders for The Independent showed that the proportion who said that growth in their sector was slowing had risen from 26 per cent in June to 35 per cent now.

However, the survey suggests business leaders are not losing confidence in the Government. Some 70 per cent said they were confident in the ability of David Cameron, up from 66 per cent in June, while 60 per cent had confidence in the Chancellor George Osborne (down from 62 per cent). Confidence in the Labour leader, Ed Miliband, fell from 15 per cent to 11 per cent.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Operations Manager

£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Day In a Page

Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk
Nepal earthquake: One man's desperate escape from Everest base camp after the disaster

Escape from Everest base camp

Nick Talbot was sitting in his tent when the tsunami of snow and rock hit. He was lucky to live, unlike his climbing partner just feet away...
Adopting high fibre diet could dramatically cut risk of bowel cancer, says study

What happened when 20 Americans swapped diets with 20 Africans?

Innovative study in the US produces remarkable results
Blake Lively and 'The Age of Adaline': Gossip Girl comes
of age

Gossip girl comes of age

Blake Lively is best known for playing an affluent teenager. Her role as a woman who is trapped forever at 29 is a greater challenge
Goat cuisine: Kid meat is coming to Ocado

Goat cuisine

It's loved by chefs, ethical, low in fat and delicious. So, will kid meat give lamb a run for its money?
14 best coat hooks

Hang on: 14 best coat hooks

Set the tone for the rest of your house with a stylish and functional coat rack in the hallway
Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?