Turkish Deputy Prime Minister Ali Babacan, right, met with U.S. Federal Reserve Board Chairwoman Janet Yellen on Monday in Istanbul, where Group of 20 financial officials are gathering amid worries about Greece’s financial crisis.
By HARRIET TORRY And IAN TALLEY
Updated Feb. 9, 2015 3:18 p.m. ET
Greece’s new government said it would cancel about a third of the debt-reduction and economic-overhaul measures the country had signed on to as a condition for international aid, while Germany showed no sign of backing off its insistence on the current bailout terms.
Meanwhile, a top French official fanned hopes for a compromise, saying that the will of Greek voters—who flocked to the far-left, antiausterity party Syriza last month—needs to be respected. He added, however, that Athens also must respect European budget rules.
Monday’s comments suggest that the key actors in Greece’s debt drama are sticking to their guns as an end-February deadline looms for Athens to strike a deal with its creditors in Europe and at the International Monetary Fund.
‘Without a program it will be difficult for Greece’
—German Finance Minister Wolfgang Schäuble
The impasse, five years after Greece’s debt crisis first rocked the global economy, is pushing Greece closer to the brink of default and potentially even a forced exit from the euro, an outcome that financial leaders fear could tilt the eurozone back into recession and undermine global growth.
In a sign of the high stakes, the country’s woes are emerging as a concern for finance ministers and central bankers from the Group of 20 largest economies, who are meeting in Istanbul this week.
“A strong eurozone is really important,” China’s Vice Minister of Finance Zhu Guangyao said at a conference Sunday. “We really hope Greece and the members of the European Union productively find a solution soon.”
Greek markets tumbled Monday, a day after Prime Minister Alexis Tsipras unveiled a plan in Parliament to increase the minimum wage and drop a recently introduced property tax—steps that would likely meet stiff opposition from Greece’s creditors.
He also stuck to his refusal to accept an extension of Greece’s current international bailout, which expires at the end of this month. Government officials say the country could run out of money soon after that unless a solution is found.
The turmoil in Greece cast a shadow over markets elsewhere, with U.S. stocks opening lower after declines across European equity markets.
Finance Minister Yanis Varoufakis. ENLARGE
Finance Minister Yanis Varoufakis. PHOTO: EUROPEAN PRESSPHOTO AGENCY
Greek Finance Minister Yanis Varoufakis called on eurozone finance chiefs—who are holding an emergency meeting on Greece on Wednesday in Brussels—to drop demands for Athens to continue with policies that he said have failed.
“We will submit our proposal, and move ahead with deep reforms,” Mr. Varoufakis told lawmakers in Athens. “To this list, we will add about 70% of the reforms and commitments that are in the current bailout. The remaining 30% will either be suspended or withdrawn.”
In Vienna for a meeting with his Austrian counterpart, Mr. Tsipras said a solution was important not only for Greece but for Europe as a whole. “I am very optimistic that we will be able to work together,” he said.
Germany’s Finance Minister Wolfgang Schäuble, speaking to reporters on the sidelines of the G-20 meeting, showed no sign of easing Berlin’s pressure on Greece to extend its €240 billion ($271 billion) bailout.