Stocks in Athens were down almost four per cent in mid-morning trading, after negotiators from the International Monetary Fund (IMF) walked out of talks last night. Meanwhile, the euro fell more than half a cent against the dollar, to less than $1.12.
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Markets across Europe were muted, with the FTSE 100 falling 0.5 per cent, Germany's Dax falling 0.5 per cent and France's Cac sinking 0.4 per cent.
The IMF's move signalled optimism over the country finally reaching a deal with its creditors to unlock another tranche of bailout money: in a press briefing last night, IMF spokesman Gerry Rice said the two sides were "well away from an agreement".
"The ball is very much in Greece's court," he added.
But this morning there were renewed hopes as a deal, as European Commission president Jean-Claude Juncker confirmed talks between Athens and its creditors were likely to restart soon, although politicians are unlikely to get involved until negotiations are further down the line.
However, Reuters quoted German Chancellor Angela Merkel as sounding positive: "Where there is a will, there is a way," she said.