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 Tsipras laid out plans on Sunday to dismantle Greece's "cruel"
austerity program, ruled out any extension of its 240 billion euro
international bailout, which runs out at the end of this month, and
vowed to seek reparations from Germany for World War Two.
His uncompromising maiden policy speech to parliament spooked
European financial markets and partners outside the euro area.
British Prime Minister David Cameron chaired a special meeting with
finance ministry and Bank of England officials on Monday to plan for
a possible Greek exit from the euro zone, a Treasury source said.
Ahead of a meeting of G20 finance ministers in Istanbul, the United
States and Canada urged the EU and Greece to tone down the rhetoric
over austerity and work for a compromise on the debt issue.
Greek Finance Minister Yanis Varoufakis, who found scant support on
a tour of European capitals last week for his plans to restructure
Greece's debt, angered some euro zone partners by saying on Sunday
the 19-nation single currency area would ultimately collapse if
Greece were forced out.
European Commission President Jean-Claude Juncker told reporters on
a visit to Germany: "Greece should not assume that the overall mood
has so changed that the euro zone will adopt Tsipras's government
program unconditionally."
The head of the EU's executive arm, who met the Greek leader in
Brussels last week, said he did not expect a deal on the way forward
with Greece at an EU summit on Thursday or a finance ministers'
meeting of the euro zone on Wednesday.
"I don't think we'll reach final conclusions so soon," Juncker said
at a meeting of Germany's Social Democratic Party (SPD) in Nauen,
near Berlin.
NO REPARATIONS
German Vice-Chancellor and SPD leader Sigmar Gabriel, attending the
same event, rebuffed Tsipras' call for reparations over the Nazi
occupation of Greece, saying such matters had been finally dealt
with in the negotiations that led to German unification in 1990.
Asked whether Berlin would pay compensation, Gabriel said: "The
probability is zero."
Greek financial markets sank further on Monday, pulling European
shares down, after credit ratings agency Standard & Poor's cut
Athens' rating last Friday. The index of Greek banking stocks fell
almost 10 percent to near record lows.
Government bond yields rose by up to 3.7 percentage points, with
three-year yields nearing 22 percent. The soaring rates mean Greece
is shut out of capital markets.
EU officials had hoped that Tsipras would take account of the
messages he heard from French, Italian and EU leaders last week and
tone down his policy program to make a compromise with euro zone
partners possible.
Instead, the 40-year-old prime minister stuck to his guns, rattling
off a list of moves to reverse reforms imposed by EU and
International Monetary Fund lenders, from reinstating pension
bonuses and cancelling a property tax to ending mass layoffs and
raising the minimum wage to pre-crisis levels.
Juncker said Tsipras had taken "only limited account" of EU
suggestions on the way forward in the debt crisis. Brussels has been
pressing Athens to request an extension of the bailout program for a
few months to allow time for negotiations on easing the debt burden
in exchange for economic reforms.
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Instead, the Greek leader flatly ruled out any extension and seemed
to court confrontation with Germany, the euro zone's main paymaster,
by raising the reparations issue.
A senior euro zone official said the two sides were not much closer
to a solution. There appeared to be "a very dogmatic attitude in
Athens", fueled by Varoufakis' incendiary interview and by the role
of investment bankers Lazard, which is advising Greece on the debt
issue, the source said.
The escalating standoff has alarmed the euro zone's international
partners.
U.S. Treasury Secretary Jack Lew told U.S. broadcaster CNBC: "I
think that the heat has to come down a little bit in the
conversation.
"Everybody's got to tamp down the rhetoric a little bit," Lew said
in an interview taped Sunday night and aired on Monday. "There needs
to be a conversation where Greece and all of the parties that it's
engaged with, look for a practical, pragmatic path forward."
Washington has raised public pressure on the euro zone to compromise
with Greece, irritating Germany, which has pressed for Athens to
stick to commitments to austerity and achieving a large budget
surplus to pay down its debt.
Canadian Finance Minister Joe Oliver also called for a deal over
Greece's debt, telling Reuters that while Athens must not default,
its creditors also needed to work with it "to arrive at a compromise
solution".
In London, a British Treasury official said Cameron had discussed
contingency plans for a possible Greek exit from the euro zone with
senior finance officials.
"It is not saying that anyone thinks it is going to happen, but it
is right that they have a look at the risk of Greece leaving the
euro zone. That would create real instability," he said.
(This version of the story has been refiled to fix dateline)
(Additional reporting by David Milliken in London, Randall Palmer in
Istanbul, Michael Nienaber and Stephen Brown in Berlin; Writing by
Paul Taylor; editing by Anna Willard)
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