A renewed eurozone spat with Greece contributes to a further weakening of the euro, with UK holidaymakers benefiting as a result.
Fresh uncertainty over Greece has prompted a warning from the Chancellor and helped push the pound to a seven-year high of €1.40, repors Sky News. Sterling is now at levels not seen since the autumn of 2007, meaning Britons travelling abroad will get more for their money – around €1.38 at tourist exchange rates. But Chancellor George Osborne remains focussed on resolving the deadlock over Greece, tweeting: “Just had bilateral meeting with Greek finance minister, urging them and eurozone to find solution.
“Unfortunately this Greek drama isn’t over,” he wrote. Greek finance minister Yanis Varoufakis was told by his fellow eurozone finance ministers on Monday that time was running out and he must urgently put forward concrete proposals if the country wants to secure rescue funds agreed under its bailout extension. Athens got a lifeline last month when ministers agreed a four-month deal on extending its current EU-IMF bailout, subject to the reforms being agreed.
The next payout of €7bn (£5bn) is due at the end of April. Greece may have to leave the currency union if no reform programme can be ratified. Mr Varoufakis has faced ridicule in Brussels and back home for some of his proposals, including the use of tourists to spot tax cheats. His tough negotiating style has also irritated creditors, who have signalled their patience is wearing thin. Greece has warned of a possible referendum if its plans are rejected.
The new radical left-wing government has pledged to streamline bureaucracy and tackle smuggling but its blueprint has been slammed as lacking detail, and especially figures. Jeroen Dijsselbloem, head of the Eurogroup, said on Monday: “We have lost over two weeks in which very little progress has been made – we have to stop wasting time and start talks seriously.” Mr Dijsselbloem, who is also the Dutch finance minister, added: “The extension (of the Greek bailout) is only for four months and the clock is ticking.” The deadlock, combined with the effects of the eurozone’s new QE programme, pushed the euro on Tuesday to levels not seen for years.
The FTSE 100 suffered however, having fallen more than 1.5% by Tuesday lunchtime. It was pegged back by Prudential after the insurer said its chief executive was leaving for Credit Suisse. A fall in energy stocks on weaker oil prices also weighed on the market.