The euro and stock markets fell on Monday on fears of messy default in Greece, despite a denial by a Greek government official of a deadline for coalition parties to agree harsh austerity terms attached to second EU bailout.
The government official, who declined to be named, told Reuters that the government and party leaders must agree to the terms of the crucial €130bn rescue with IMF (Berlin: MXG1.BE - news) and EU inspectors before eurozone finance ministers next meet.
He said the parties did not have to respond by today and there was "no deadline".
Panos Beglitis, a spokesman of the PASOK socialist party which is a coalition partner, said on Sunday that leaders of the three parties had to give their responses by noon on Monday.
Some reports had said the Eurogroup finance ministers were going to meet on Monday but no hard and fast date was set. A Brussels source said Friday, February 8 had been mooted as a possible date.
Investors remain nervous about Greece as the other key part of the second EU bailout - government debt deal with private bondholders - still remains at an impasse.
European leaders have said Greece will not receive funds from the €130bn rescue package unless it can persuade its private creditors to take losses to reduce the country’s debt pile.
Lucas Papademos , the Greek prime minister, said on Sunday that he had failed to secure a bondholder agreement, despite appealing for help from the bosses of the International Monetary Fund (IMF) and the European Central Bank (ECB) to help break the dangerous deadlock.
Bondholders have agreed to take a 50pc "haircut" on their holdings but have been haggling over the interest rate under new bonds they will be given as part of a bond swap.
However, the investors are unhappy with the terms of a bond swap that they claim leaves them accepting an effective 70pc loss. They believe EU creditor nations should accept more losses.
There are six weeks left before Greece faces a €14.5bn (£12bn) bond repayment which it cannot meet without international aid.
The euro, which was trading at $1.3156 againt the dollar on Friday, retreated to $1.3073 on Monday afternoon. Stock markets also fell with France's CAC (Frankfurt: 924169 - news) dropping 0.5pc, the FTSE losing 0.14pc, Germany's DAX (Xetra: ^GDAXI - news) slipped 0.15pc, while on Wall Street the Dow (NYSE: DPD - news) fell 0.3pc,
"Uncertainty about Greece is pushing investors to take a bit of profit," said Michael Hewson, market analyst at CMC Markets.
"We've had a really big rally since the beginning of January. We've seen a big sell-off in the banking sector this morning, which is not surprising, given French banks' exposure to Greece."
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