Investors gave their verdict on the new Greek government, selling the country’s stocks and bonds in a signal to Prime Minister Alexis Tsipras of the price he will pay for sticking to promises to end austerity.

Hardest hit were banks, falling as much as 30 percent on Wednesday because of concern about their supply of funds. In the run-up to Sunday’s election, Greek deposit outflows accelerated last week to levels not seen even at the peak of the debt crisis, totaling 11 billion euros ($12.5 billion), according to a person familiar with the matter.

Tsipras’s plans to boost the minimum wage and halt the sale of state assets helped win him a decisive endorsement from voters. He then formed a coalition with a party that also wants to ditch Greece’s bailout terms and appointed a finance minister who has called them a trap, alarming investors that he’s set for a protracted clash with fellow European leaders.

“The market was expecting most of it was going to be political posturing ahead of the elections,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. Instead, “there’s walk after the talk, and a good deal of it,” he said.

Standard & Poor’s said it may cut Greece’s credit rating, already five levels below investment grade, should the new government fail to agree with official creditors on further financial support for the country.

Markets Plunge

Stocks and bonds slumped after Germany and the Netherlands warned Tsipras against abandoning prior agreements on aid and analysts said his policies might lead to Greece’s exit from the euro region. Yields on three-year bonds rose 74 basis points as of 10:40 a.m. in Athens on Thursday to 17.46 percent, after jumping 2.7 percentage points the day before.

The benchmark Athens General Index decreased 9.2 percent to its lowest level since 2012 before recouping 2.3 percent on Thursday. National Bank of Greece SA, Eurobank Ergasias SA, Piraeus Bank SA and Alpha Bank SA all fell more than 25 percent during the rout.

The market slump deepened even after the 40-year-old premier and his finance chief sought to allay concern after the new cabinet met for the first time.

“Talks won’t be easy, they never are in Europe,” Finance Minister Yanis Varoufakis, 53, a university economist, said as he took over from his predecessor. “There will be no duel, no threats, or an issue of who blinks first.”

“There will neither be a catastrophic clash, nor will continued kowtowing be accepted,” Tsipras said on Wednesday, in comments broadcast live on Greek television. At the same time, the new Greek leadership “will not be forgiven” if it betrays its pre-election pledges to renegotiate the terms of the country’s bailout, he said.

German Warning

While Tsipras came to power on a platform of writing down Greek public debt, raising wages and halting spending cuts while remaining in the euro, European policy makers have told him he’ll have to choose which of those goals to aim for.

German Vice Chancellor and Economy Minister Sigmar Gabriel, who heads Chancellor Angela Merkel’s Social Democrat coalition partner, was the latest to voice warnings to Tsipras.

“We want to keep Greece in the euro but it needs implementation of the agreed measures,” Gabriel said on Wednesday in Berlin. “If Greece wants to diverge from any of these measures then it must bear the economic consequences of this within its own borders.”

That dialog will continue on Thursday when the president of the European Parliament, Martin Schulz, visits Athens. Jeroen Dijsselbloem, chair of the euro region’s group of finance ministers, arrives the following day. The Greek government is willing to hold negotiations with everyone, Tsipras said.

Outstanding Debt

The country has about 320 billion euros of outstanding debt. It has to refinance Treasury bills on Feb. 6 totaling 1 billion euros and another 1.4 billion euros on Feb. 13, according to data compiled by Bloomberg.

The government typically would do that mostly through local banks, who are now suffering from an outflow of deposits.

On Jan. 19-23, outflows were steeper than even in May 2012, when Greece reached the brink of exiting the euro area, according to the person with knowledge of the data, who asked not to be identified because the information isn’t public.

The Single Supervisory Mechanism, the body based in Frankfurt that regulates Greek banks, has told them they shouldn’t do anything that could endanger their liquidity position, such as investing in assets that can’t be used as collateral. They include Treasury bills, which keep the Greek state afloat in the absence of bailout loans disbursements.

European Central Bank Supervisory Board Chair Daniele Nouy said in an interview with Bloomberg Television that while banks face a difficult situation they are “pretty strong” after having their balance sheets bolstered.

Exploited Country

German Economy Minister Gabriel did at least offer some encouragement for Tsipras, who portrayed his Syriza party’s rise to power as a revolt against establishment parties who’ve dominated Greek politics for the past 40 years.

“It’s a country that has been exploited for much too long by its political and economic elites,” Gabriel said. “The country was made prey for two parties.”

Whether the government in Athens turns rhetoric into reality will be tested first when Greece’s new foreign minister, Nikos Kotzias, has the opportunity to block further sanctions on Russia at an EU meeting in Brussels on Thursday.

Kotzias, a politics professor and former communist, has advocated closer ties with Russia, spoken out against a German-dominated Europe and, in the 1980s, praised the Polish government’s crackdown on the Solidarity movement.

“Anyone who thinks that in the name of the debt, Greece will resign its sovereignty and its active counsel in European politics is mistaken,” Kotzias said at the ceremony to take over the Foreign Ministry. “We want to be Greeks, patriots, Europeanists, internationalists.”

Bloomberg