Greek Radical Left Party Says If Threatened, Athens Will Repudiate Its Debts

Well, nothing like instilling confidence in the markets with a few threats to proudly default on your obligations. And the Greek moneyed classes can see the writing on the wall, as the video below indicates.

See the Wall Street Journal, "Greek Leftist Leader Throws Down Gauntlet on Debt" (via Memeorandum):

ATHENS — The head of Greece's radical left party—throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors—said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts.

A financial collapse in Greece would drag down the rest of the euro zone, said Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country's next prime minister. Instead, he said, Europe must consider a more growth-oriented policy to arrest Greece's spiraling recession and address what he called a growing "humanitarian crisis" facing the country.

"Our first choice is to convince our European partners that, in their own interest, financing must not be stopped," Mr. Tsipras said in an interview with The Wall Street Journal. He said Greece doesn't intend to take any unilateral action, "but if they proceed with unilateral action on their side, in other words they cut off our funding, then we will be forced to stop paying our creditors, to go to a suspension in payments to our creditors."

According to recent opinion polls, Mr. Tsipras's party is poised to win the most votes in elections next month, bettering its surprise second-place finish in an inconclusive May 6 vote that left no party or coalition with enough seats in Parliament to form a government. With Mr. Tsipras likely to win pole position in the coming vote, it raises the risk that Greece will soon face a showdown with European creditors over the contentious austerity program that Athens must adhere to in order to receive fresh aid.

Mr. Tsipras's remarks come as Greece's failure to form a coalition government has fueled euro-zone tensions and spurred talk of a potential Greek exit from the common currency. This week, Greek citizens, anxious over the possibility their euros could be redenominated into a weaker new drachma, withdrew hundreds of millions of euros from local banks. On Thursday, Fitch Ratings downgraded its ratings on Greece two notches further into junk territory, pointing to the increased risk that Greece may leave the euro zone.

In Spain, another vulnerable euro-zone economy, the government Thursday sought to quell fears sparked by an unconfirmed report of massive withdrawals from Bankia SA, an ailing lender that Spain rescued last week. "It's not true that there's a deposit flight," Deputy Finance Minister Fernando Jiménez Latorre said.

Worries that the turmoil surrounding Greece could lead to contagion sent the euro to its lowest level against the dollar since mid-January, extending its decline over the past three weeks to 4%. Demand for the perceived safety of U.S. Treasurys pushed the yield on the benchmark 10-year bond to 1.702%, the lowest closing level in its history.

In Greece, a caretaker government was sworn in Thursday at the presidential palace, putting in place a technocratic cabinet led by senior judge Panagiotis Pikrammenos as prime minister that will take the country to fresh elections.

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