Stock markets down as Greece debt talks falter

Stock markets have fallen as eurozone finance ministers continue to put pressure on Greece's private creditors to accept a lower interest rate on their loans to Athens.

UK and French share indexes closed lower on Tuesday, while Wall Street fell on opening.

Ministers said creditors must take less than the 4% they had offered and urged both sides to reach a deal this week.

A deal is necessary for Greece to receive the bailout funds it needs.

Without the funds, Athens will not be able to make billions of euros of loan repayments due in March.

The FTSE 100 index in London closed down 0.5%, while the Cac 40 in Paris fell 0.3%, but the Dax in Frankfurt reversed earlier losses to close slightly up by the end of trading, gaining 0.4%.

The Dow Jones Industrial Average in New York was down 0.3% in morning trading.

Ministers confirmed that 130bn euros ($169bn; £108bn) was available for the country, but also called on Greece to accelerate structural reforms to strengthen its economy before funds would be released.

However, Charles Dallara, head of the Institute of International Finance (IIF), which is representing Greece's private creditors in negotiations with Athens, warned Europe was putting a "decade of progress at risk" over the management of the talks.

He added the 4% figure was a firm statement of their intent. He said: "Our offer is on the table and our position is clear."

He added Europe must keep the support of the private sector, given the massive amounts of debt that have to be refinanced from France to Portugal.

He added that there was not a country that did not need investment from the private sector.

"Investors need to feel confident in their investments in sovereign debt,'' he said.

Separately, figures suggested that private sector activity in the eurozone grew for the first time in five months in January.

Initial estimates from the closely-watched Markit PMI survey gave a reading of 50.4, up from 48.3 in December. Any number above 50 suggests growth.

Lower rates

The finance ministers, headed by Luxembourg's Prime Minister Jean-Claude Juncker, said they welcomed progress made in the talks between Athens and its private creditors, but called for an agreement "in the next few days".

Mr Juncker also made clear that ministers backed Greece over the rate of interest it should pay on new bonds that will replace existing bonds held by creditors.

"Ministers asked their Greek colleagues to pursue negotiations to bring the interest rates on the new bonds to below 4%, which implies the interest comes down to well below 3.5%," he said.

"The goal is to reduce [Greece's] debt from 160% of GDP now to about 120% by the end of the decade," said the BBC's Europe correspondent, Chris Morris.

"The current offer, which representatives of the banks had suggested was final, would not achieve that goal."

Ministers reiterated that a deal with private creditors was essential for the European Commission, European Central Bank and International Monetary Fund to release further bailout funds.

"Greece and the banks have to do more in order to reach a sustainable debt level," said Dutch Finance Minister Jan Kees de Jager.

"And we have to await the discussions about that because a sustainable debt level is absolutely a precondition for the next programme [of bailout funds]."

Debt deadline

The finance ministers said they expected Greece's creditors to accept a nominal 50% cut to the value of the loans they have made to Greece.

The IIF has said a technical team would continue to work further on the details of an agreement.

European leaders agreed in principle last year that private lenders would voluntarily write off 50% of their loans to Greece, but private creditors still need to agree the precise terms of the deal.

The 130bn euro rescue package is crucial if Greece is to meet its next debt repayment deadline.

Without the bailout, Greece would not be able to pay back 14.5bn euros of maturing bonds in March.

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