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Tsipras says deal can be done as Greek banks lead stocks higher

Friday, June 19, 2015 - 16:58
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Greek Prime Minister Alexis Tsipras said he's confident a deal on his country's finances can be reached at an emergency summit of European leaders on Monday.

[LUXEMBOURG] Greek Prime Minister Alexis Tsipras said he's confident a deal on his country's finances can be reached at an emergency summit of European leaders on Monday.

Banks led the Athens Stock Exchange index higher on Friday on optimism also that the European Central Bank is preparing to maintain a lifeline at its own emergency session today. Thousands of people assembled outside the Greek Parliament in Athens last night asking for the nation to be saved after the government earlier blamed a conspiracy to blackmail Greece for a breakdown in talks in Luxembourg on Thursday.

The summit on Monday "is a positive development in a path toward a deal," Mr Tsipras said in an e-mailed statement from his office. "We aimed that final negotiations take place at the highest political level in Europe, and we are now working for the success of this summit. Those who bank on crisis and terror scenarios will be proven wrong."

As Greece heads toward the climax of almost five months of talks before its existing bailout agreement ends on June 30, the country is staring into the unknown with its euro membership hanging by a thread. All the same, optimism that a deal may be in the offing prevailed over negative sentiment after a meeting of finance ministers ended fruitless.

Stock and bond markets reflected the developments. After falling on Thursday they were at worst little changed. Shares in Alpha Bank AE were up 3.7 per cent at 11:17 am. Athens time, while Piraeus Bank SA was up 2.7 per cent. The yield on Greece's two-year bonds was up eight basis points to 28.7 per cent.

"Tsipras issued a dovish statement this morning, indicating that he will blink and come to an agreement," said Miranda Xafa, a former Greek representative to the IMF who now runs a consultancy in Athens. "The Greek premier overplayed his hand, believing that Greece is systemic and therefore creditors would accept his demands for fear of contagion."

With the spectre of capital controls looming, key players deciding Greece's fate voiced their exasperation with Greece's top negotiators while the silence of others, such as German Finance Minister Wolfgang Schaeuble, also spoke volumes.

"The key emergency is to secure a dialog with adults in the room," International Monetary Fund Managing Director Christine Lagarde said after listening to Greek Finance Minister Yanis Varoufakis expound in Luxembourg on Thursday. "What we lack is a dialogue."

Greece and its creditors - the ECB, the IMF, and the European Commission - seemed further apart than ever after four hours of closed-door talks. Without a settlement, the ties still binding Greece to the currency bloc may begin to unravel with funding keeping Greek banks afloat under scrutiny.

Asked if he could imagine Greece being forced out of the euro, Jeroen Dijsselbloem, the Dutch minister who leads the group of euro-area finance chiefs, said: "The way it goes now we're going in that direction."

BLOOMBERG