Greece in 'final stage' of bail-out talks as bank shares collapse for a third day

Greece's prime minister says talks between Athens and its creditors are in the 'final stage' as bank stocks suffer a third day of losses

Greece's Prime minister Alexis Tsipras delivers a speech during a gathering at the Agriculture ministry in Athens, Greece, on Wednesday

Greece is close to reaching a deal with its creditors to secure a €86bn lifeline that will keep it afloat for the next three years and secure its place within the eurozone, according to the country's prime minister.

As shares in Greece's benchmark index continued to plummet, Alexis Tsipras said meetings between the government and Greece's creditors had made good progress.

"We are in the final stretch," said Mr Tsipras. "Despite the difficulties we are facing we hope this agreement can end uncertainty on the future of Greece."

Greek bank shares plunged for a third day on Wednesday, after the end of a five-week shutdown sparked the biggest stock market drop on record.

The Athens stock exchange closed down 2.44pc at 643.86 on Wednesday, after falling by as much as 4.4pc, while an index of the country's top four banks fell 25pc to 246.50.

Bank shares have now fallen close to the maximum 30pc allowed for three straight days.

Greek bank shares suffered a third day of losses on Wednesday, after the end of a five-week shutdown sparked the biggest drop in the stock market on record
An employee of the Athens' Stock Exchange stands behind a reception desk in Athens, Greece Credit: AP

The Athens stock exchange in Greece, where bank shares have been hit for a third day (Photo: AP)

Discussions between Greece and representatives from the International Monetary Fund (IMF), European Central Bank (ECB), European Commission (EC) and the European Stability Mechanism, or bail-out fund, started in the last week of July.

Mr Tsipras suggested that the European Parliament should also be involved in talks, describing it as a "democratic" and "accountable" institution.

He said: "It should at some point be under the control and monitoring of the European Parliament, a democratic institution which has accountability," Mr Tsipras said.

Jean-Claude Juncker, the head of the EC, echoed Mr Tsipras's comments on Wednesday. He told reporters that an agreement on a third bailout for Greece was likely to be agreed this month.

"All the reports I am getting suggest an accord this month, preferably before the 20th," when Greece must repay some €3.4bn due to the ECB, Mr Juncker said.

Greece's ruling party also urged its members on Wednesday to back a third bail-out deal.

Nikos Filis, a spokesman for Syriza, said Athens was seeking a full agreement so that it could receive a first payment of €25bn. He rejected the idea of a second bridging loan.

Greek Finance Minister Euclid Tsakalotos attends a meeting of the Eurogroup finance ministers

Good progress? Euclid Tsakalotos gestures at a meeting in Brussels (Photo: AFP)

"We are seeking to have a deal," he told state television. "The deal will have tough measures. What is important is that the financing of the Greek economy starts.

Daniele Nouy, chairman of the ECB's banking supervisory agency, said officials were poised to review the capital needs of Greek lenders. Ms Nouy suggested that any shortfall identified in an upcoming review could be plugged using the country's rescue funds, without the need to force losses on to bondholders and large depositors through a bail-in.

"If [our] assessment identifies capital shortfalls for one or more significant institutions, these may be covered by the capital buffer to be established under a new Greek programme, after applying the legal framework, she wrote in an open letter to Jonás Fernández, a member of the European Parliament.

It came as the ECB reportedly decided on Wednesday to leave its emergency credit lifeline for Greece unchanged for the next two weeks.

Last month, the central bank raised its Emergency Liquidity Assistance (ELA) for Greece's struggling banks by €900m to €90.4bn, after Athens and its creditors reached an in-principle agreement for a third rescue package.

A separate survey of eurozone businesses showed growth accelerated at the end of last month as companies largely put the Greek debt crisis behind them.

With conditions and sentiment improving in the bloc after the deal, Markit's July final Composite Purchasing Managers' Index (PMI) stood at 53.9, beating an earlier estimate of 53.7.

"The eurozone economy showed reassuring resilience in the face of the Greek debt crisis in July," said Chris Williamson, Markit's chief economist.

However, an earlier gauge this week showed Greek manufacturing output fell to the lowest level ever recorded as capital controls strangled Greek businesses.