European Stocks Tumble as IMF Quits Greece Talks
European equities closed lower on Friday, June 12, as the standoff between Greece and its creditors threatens to push the continent’s financial system to the breaking point.
When the Euro Stoxx 50, which tracks 50 of the largest and most liquid stocks in Europe, closed, it was down by 1.38%. The German DAX slipped 1.20%, with 29 of its 30 members dropping. Equity markets in the U.K., France, and Spain also closed the trading session lower.
The International Monetary Fund (IMF) said on Thursday, June 11, that it had stopped bailout talks with Greece due to a lack of progress in reaching an agreement. “There are major differences between us in most key areas,” IMF spokesperson Gerry Rice said on Friday, “There has been no progress in narrowing these differences recently, and thus we are well away from an agreement.” (Source: Reuters, June 11, 2015.)
One major roadblock in reaching an agreement consists of the parties’ different views on austerity measures. Greece’s creditors are demanding pension cuts and labor market reforms. However, Greek Prime Minister Alexis Tsipras, the leader of an anti-austerity party, rejected those demands. For his new government, cutting wages and pensions make up a red line that will not be crossed.
The pressure is now on Greece. The country was given less than 24 hours by the IMF to come up with a serious counter proposal to end the impasse. The officials did not specifically indicate what would happen if Greece were to fail to present a proposal on time.
If Greece does not receive new funds, the country is at risk of defaulting on its 1.6 billion euro payment to the IMF. If that happens, market strategists fear a Greek bankruptcy would push Europe’s financial system to the brink.
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