European shares dip ahead of Greece showdown

Today could be Varoufakis' final chance to have an extension approved by Greece's European partners (Source: Getty)

European markets edged down in the run-up to yet another showdown between Eurozone leaders and Greece, scheduled for today.

Germany's Dax fell 0.24 per cent in early trading, while France's Cac dropped 0.31 per cent. The FTSE 100, on the other hand, remained largely flat, managing only a 0.09 per cent rise.

The uncertainty hit Europe's currency, too, pushing the price of one euro down 0.29 per cent against the dollar to 1.1335. Against the pound, it fell 0.18 per cent to 0.7361.

An agreement is likely to come down to a difference of personalities between German finance minister Wolfgang Schaeuble, and his Greek counterpart, Yanis Varoufakis.

Yesterday Germany rejected a request by Greece to extend its bailout for another six months, with Berlin calling the proposal a "Trojan horse". In a 34-word statement, a spokesman for Schaeuble said the request from Greece "is not a substantive proposal for a solution".

But time is short for Varoufakis, who faces a €172bn (£126bn) bill at the end of next week, with no way of paying it.

Germany has insisted it will only approve an extension to Greece's loan if the country agrees to a reform package set out by its lenders, which Greece's new government refuses to do.

A failure to reach an agreement is likely to lead to Greece defaulting on its loan repayments, followed by a Greek exit from the euro. Germany's Eurozone counterparts have voiced concerns over what the impact would be on its markets, but Schaeuble has maintained a hard line, saying "I'm ready for any kind of help, but if my help is not wanted, that's fine".

To add to Greece's pain, yesterday a report by ratings agency Standard & Poor's (S&P) suggested the risk of contagion to other Eurozone members from a so-called "Grexit" could be less than thought. Europe has a stronger rescue mechanism and less exposure to Greek banks than it previously did, and investors no longer associate Greece's economy with other periphery members, it said.

Moritz Kraemer, a credit analyst at S&P, said: "We believe that the financial burden of a Grexit on the remaining 18 Eurozone sovereigns would be moderate and absorbed over decades, and we therefore do not expect that a Grexit, by itself, would have significant rating implications for these sovereigns."

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