Athens, February 8

Bank shares crashed on the Athens stock exchange today, losing a fifth of their value within hours, as the government was seen facing an impossible choice between further austerity and social unrest.

The FTSEB index of financial stocks was down over 20 per cent in mid-day trading, helping pull overall market index more than seven per cent lower.

Athens stock exchange had already lost 8.89 per cent of its value last week, with banking index taking a beating with a drop of 24.3 per cent.

The main banks had gained a little ground after receiving a recapitalisation boost in December, six months after a disastrous tug-of-war between the leftist government of Prime Minister Alexis Tsipras and Greece’s EU-IMF creditors forced the imposition of capital controls and nearly wiped out the value of their shares.

Greece last week wrapped first phase of a fiscal review by its EU-IMF creditors, with no agreement in sight on a controversial pension reform that has caused a social backlash against Tsipras’ fragile coalition.

German business daily Handelsblatt over the weekend cited a source close to the talks saying that ‘Greece was doing a lot on paper’ but less on the application front.

Leftist daily Avgi, which is close to government, on Sunday said there were ‘many and significant’ difficulties in reaching an agreement on Greece’s fiscal targets for 2017 and 2018. These include a gap of 800 million euros and disagreements over how to handle the mountain of bad loans weighing down Greek banks.

Protests are mounting against Tsipras’s government — which aims to slash maximum pensions — with a general strike held last week and farmers intermittently blocking national highways and border crossings for the past three weeks.

The prime minister has a majority of just 153 deputies in the 300-seat parliament with which to secure passage of the pension bill later this month.