ECONOMY

Greek euro exit risk raised by Commerzbank as talks break down

The risk of Greece exiting the euro was raised to 50 percent by Commerzbank AG after talks with euro- area finance ministers broke down on Monday.

Negotiations in Brussels ended abruptly after Greek Finance Minister Yanis Varoufakis refused to meet European demands that his country request an extension of its existing bailout program. Dutch Finance Minister Jeroen Dijsselbloem, who leads the finance ministers’ group, halted the meeting, saying ministers could reconvene Friday if Greece changes tack.

“I hope they will ask for an extension of the program,” Dijsselbloem said Tuesday morning, as Greek bonds tumbled. “It really is up to them. We cannot make them, we cannot ask them. We stand ready to work with them.”

Time is running out: The current aid agreement expires at the end of February. Failure to reach an accord could see Greece stumble out of the euro, and while Europe’s defenses are stronger than when the country flirted with exit from the single currency three years ago, a departure could ultimately trigger a flight from risk, bank runs and a downturn in European demand.

The yield on Greece’s three-year bonds jumped 242 basis points to 19.995 percent at 10:16 a.m in Athens. The euro, which lost ground Monday, was little changed at $1.1349.

Commerzbank said in a note the chance of Greece leaving the euro had risen from 25 percent. “After the euro-zone finance ministers again failed to find an agreement with Greece today, the euro membership of the country hangs in the balance,” it said.

[Bloomberg]