ATHENS, Greece — Shares in Greek banks plunged on the Athens Stock Exchange Monday amid expectations they will have to accept higher than agreed losses on the country's government bonds as part of a new eurozone debt deal.
Greek banks hold billions in the country's government debt, and investors fear they will be unable to withstand losses on the bonds without some form of state support.
Bank stocks were down on average by more than 15 percent late afternoon Monday, pulling the exchange's general index down 5.7 percent to 737.98. Other European stock indexes were buoyed by the prospect of a debt agreement.
Leaders of the 17-nation eurozone, fearing the crisis could spread from debt-shackled countries like Greece to larger economies, failed to clinch a comprehensive debt deal at a weekend summit. They expect to finalize an agreement by Wednesday.
Greece's rescue lenders — other eurozone countries and the IMF — warned in a report this month that the course of the country's national debt remains "extremely worrying," blaming delays in privatizations and the implementation of long-term reforms. It said that a July 21 European debt agreement, seeking voluntary losses for Greek bondholders of about 20 percent, may "not suffice."
"The report says ... that the Greek debt under these circumstances is not sustainable," Development Minister Michalis Chrysohoidis told private Skai radio Monday.
"Unfortunately, the decisions taken on July 21 were not the end ... but the beginning."
Greece has been surviving on a €110 billion ($150 billion) rescue-loan program after being frozen out of bond markets last year by inordinately high interest rates. The interest rate on 10-year Greek bonds stands at nearly 25 percent, compared with the benchmark German rate of just over 2 percent.
The two-year financial crisis has hammered Greek banks. Shares in the country's largest lender by assets, National Bank of Greece, have tumbled from more than €20 in October 2009 to just €1.60 Monday.
"There is no prospect of revival in Greece until and unless Europe gets its act together," financial analyst Yannis Varoufakis told AP television.Comment on this story
"Greece will have to wait in this comatose state, zombified state, until Europe collapses or fixes its problems."
Expecting a fourth year of recession in 2012, the country is suffering from a rapid rise in unemployment — now at 16.5 percent — and a drop in living standards.
On Monday, unemployed Greeks waited in long lines outside state labor offices to collect benefit checks, following a computer system glitch. Public servants continued protests over new salary cuts after a week that saw a 48-hour general strike, mass demonstrations, and riots central Athens.
Finance Ministry officials and court employees have strikes planned this week, while most public transport will halt in greater Athens on Tuesday.