Greece will not default on bailout debts - PM Tsipras

media captionAlexis Tsipras: "Our priority is a new renegotiation with our partners, seeking a just, viable and mutually beneficial solution"

New Greek PM Alexis Tsipras says his country will not default on its debts.

Addressing his first cabinet meeting since Sunday's victory, Mr Tsipras said he would negotiate with creditors over the €240bn (£179bn; $270bn) bailout.

"We won't get into a mutually destructive clash but we will not continue a policy of subjection," said the left-wing Syriza party leader.

Greek bank stocks lost more than a quarter of their value on Wednesday as prices fell for a third day.

Piraeus Bank lost nearly 29%, Alpha Bank 26%, and National Bank and Eurobank around 25%, AFP reported.

Germany's vice-chancellor said it was unfair of Greece to expect other states to pick up its bills.

media captionAs Greece prepares its plans to cut its debt Mark Lowen looks at the issues around a possible "haircut"

"I cannot imagine a haircut [debt reduction]," Sigmar Gabriel said.

As Mr Tsipras made his debut cabinet speech, Greek government bond yields rose to their highest since the 2012 debt restructuring, amid investor concern that the anti-austerity coalition was gearing up for a clash with international creditors.

The Athens Stock Exchange fell by 8% in response to Mr Tsipras's remarks, and as it emerged that his government was putting on hold major privatisation projects, including the port of Piraeus and the main power company, the Public Power Corporation of Greece.

Greece has endured tough budget cuts in return for its 2010 bailout, negotiated with the "troika" - the EU, International Monetary Fund (IMF) and European Central Bank (ECB).

Its economy has shrunk drastically since the 2008 global financial crisis, and high unemployment has thrown many Greeks into poverty.

image copyrightAP
image captionIndependent Greeks leader Panos Kammenos (left, speaking to Deputy Prime Minister Giannis Dragasakis, centre, and Alexis Tsipras) is the new defence minister
image copyrightEPA
image captionThe coalition held its first cabinet meeting at the Greek parliament
image copyrightReuters
image captionFinance Minister Yanis Varoufakis (Syriza) is an economist who studied at British universities
image copyrightAFP
image captionMr Varoufakis (R) kissed his predecessor as finance minister, Gikas Hardouvelis, goodbye
image copyrightReuters
image captionNew Greek Foreign Minister Nikos Kotzias (Syriza) is a politics professor from the University of Piraeus who studied in Germany

Analysis: Mark Lowen, BBC News, Athens

Alexis Tsipras sought to strike a balance - defiant about negotiating debt relief from the eurozone, while reassuring his European partners. Across the eurozone, governments oppose a debt write-off for Greece.

The Netherlands has added its voice to that of Germany and France in insisting that Greece stick to its previous commitments. The Dutch finance minister, who heads Eurozone group of ministers, will be in Athens later this week for discussions.

Both sides will try to stick to their positions and it may come down to which will blink first.

Mr Tsipras's speech is, perhaps, an olive branch extended from Athens after hardline pre-election rhetoric, but there is no sign that the new government will back down on its opposition to austerity.

'Viable solution'

Vowing to defend Greek dignity, Mr Tsipras said a renegotiation of the Greek debts would aim for a "viable, fair, mutually beneficial solution". He did not give any details.

Mr Tsipras promised "realistic proposals" for an economic recovery and vowed to fight corruption and tax evasion. His recovery plan, he said, was aimed at preventing deficits in the future.

The new coalition government - with the right-wing but equally anti-austerity Greek Independents - was sworn into office on Tuesday.

Its chief economics spokesman, Euclid Tsakalotos, has argued that it is unrealistic to expect Greece to repay its huge debt in full.

The current bailout programme of loans to Greece ends on 28 February. There are still 1.8bn euros of loans that could be disbursed to Greece if it meets the conditions imposed by the troika.

Economists estimate that Greece needs to raise about 4.3bn euros in the first quarter of 2015 to help pay its way, with Athens possibly having to ask the IMF and eurozone countries.

German warning

Mr Gabriel, who is also economy minister and leads the junior partner in Angela Merkel's coalition government, said: "Our aim must be to keep Greece in the eurozone but solidarity and fairness work both ways."

"Citizens of other euro states have a right to see that the deals linked to their acts of solidarity are upheld," he said.

"Every country in Europe has its own history and cannot separate itself from this through new elections."

He urged the Greek government to talk to its partners before going ahead with decisions such as halting the privatisation of the port of Piraeus.

"Things that Greece itself won't do cannot be shunted on to the taxpayers and employers in neighbouring states," the German Social Democrat leader said.

Greek 10-year bond yields climbed above 10%, reflecting fears that investors may not get their money back.

The yield of a bond is inverse to its price: as the price goes down, the yield grows.

Greek economy in numbers

  • Average wage is €600 (£450: $690) a month
  • Unemployment is at 25%, with youth unemployment almost 50%
  • Economy has shrunk by 25% since the start of the eurozone crisis
  • Country's debt is 175% of GDP
  • Borrowed €240bn (£188bn) from the EU, the ECB and the IMF

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