Greece Rows Back On Austerity Cuts In EU Snub

Greek stocks are nose-diving for a third day as the country's new prime minister sets a collision course with creditors by overturning spending cuts imposed under its bailout programme.

Investors have reacted with horror to the election of Alexis Tsipras, with Greek stocks on course for their worst week ever in the wake of his Syriza party's win in Sunday's poll .

The PM told the first meeting of his cabinet that the coalition government would deliver "radical" change by not backing down on its anti-austerity path.

He said that while he did not wish to antagonise creditors, the Greek people had demanded a new focus and he would not seek to build up "unrealistic surpluses" to service Greece's massive public debt - funds that are a condition of its €240bn (£179bn) rescue.

Mr Tsipras announced that pensions for low-paid public sector workers would rise and some job cuts would be reversed as part of his efforts to grow employment, with more than 25% of Greeks currently out of work.

"Our priority is also a new negotiation with our partners, seeking to reach a fair, viable and mutually beneficial solution so that the country exits the vicious circle of excessive debt and recession," he said.

Almost two-thirds of young people in Greece are without work and 32% of children are living below the poverty line according to recent estimates.

The country's international lenders have maintained they will not let the country off the hook but indicated they may be prepared to give Greece more time to pay back its loans.

It raises the prospect of showdown talks, with Germany particularly anxious that other eurozone nations are not encouraged to deviate from austerity and place the single-currency at greater risk.

Greece is yet to get its hands on a final €7.2bn (£5.4bn) - agreed in principle with the EU, European Central Bank and International Monetary Fund - cash which is conditional on further reform.

Demands that Greece raises more funds were dealt a further blow when Mr Tsipras confirmed the planned sale of a 30% stake in Public Power Corporation of Greece - the country's biggest utility - had been halted.

Uncertainty over the outcome of the creditor negotiations since the election has sparked three days of sharp losses in top Greek stocks - with some banks losing half their value.

National Bank (NYSE: NBHC - news) of Greece was almost 30% down on the day.

The cost to Greece of servicing its debts has also climbed, with 10-year debt yields climbing back above 10% as investors fret about the possibility of a Greek default.