Greece and its EU-IMF creditors have failed to break the deadlock at emergency talks on a bailout deal, raising fresh fears of a default by Athens that could send it crashing out of the euro.
Photo: It's all laughs as Greek prime minister Alexis Tsipras, Italian prime minister Matteo Renzi and German chancellor Angela Merkel speak in Brussels. (Reuters: Yves Herman)
Eurozone finance minister talks, which had been supposed to pave the way for EU leaders to sign an accord at a summit in Brussels, broke up abruptly with no agreement on a Greek financial reform plan.
Marathon meetings between leftist prime minister Alexis Tsipras and the heads of the European Commission, European Central Bank and International Monetary Fund, Greece's main creditors, also ended with no deal.
In some areas one even gets the impression that we have moved backwards.
German chancellor Angela Merkel
"We have not made the necessary progress," Germany's chancellor Angela Merkel told reporters.
"In some areas one even gets the impression that we have moved backwards."
Stock markets in Asia and Australia slid on Thursday as traders awaited the outcome of the fast-changing negotiations while most European markets ended steady after a riding a rollercoaster of small gains and drops.
Greece needs creditors to unlock the remaining funds in its bailout to pay a 1.5 billion euro ($2.2 billion) debt payment to the IMF, but the lenders have refused until Greece agrees to new spending cuts and reforms.
Tsipras remains confident of reaching deal
Mr Tsipras, whose radical Syriza party won elections in January after promising Greeks it would end five years of bitter bailout-imposed austerity, insisted a deal was still possible.
"After the comprehensive Greek proposals, I'm confident we'll reach a compromise that will help the Eurozone and Greece to overcome the crisis," Mr Tsipras said as he arrived at the summit.
He was later seen laughing and joking with Ms Merkel and Italian prime minister Matteo Renzi.
EU president Donald Tusk — who last week warned of the growing risk of a "chaotic, uncontrollable Grexident", or accidental Greek exit from the euro — said on Thursday that he saw the possibility of a "happy end" to the talks, comparing them to a drama by the Greek playwright Sophocles.
The truth is this is actually just a currency war, and there really is no chance the all-powerful German export machine will allow Greece to exit the Eurozone, writes Alan Kohler.
But there were few smiles among the finance ministers after their talks broke up, with sources saying they were likely to meet again on Saturday, which would be their eleventh set of talks since the stand-off began.
The creditors have insisted on reforms to pensions and value added tax (VAT) as well as cuts to defence spending before they release any of the remaining 7.2 billion euros ($10.4 billion) in Greece's 2012 bailout fund.
Differences between the two sides were so wide that despite two days spent to strike a compromise, EU-IMF creditors and Greece admitted failure and tabled rival reform plans to worried Eurozone finance ministers.
Greece's outspoken finance minister Yanis Varoufakis said some of his counterparts had also "criticised not only our text but also the text of the [creditor] institutions".
Mr Tsipras had been up for much of the night locked in talks with Christine Lagarde of the International Monetary Fund, Mario Draghi of the European Central Bank and Jean-Claude Juncker of the European Commission.
IMF expects Greece to make June payment
The IMF meanwhile said that it believes Greece will make the payment scheduled for June 30.
Talk of a default is "all speculation, because we're expecting the payment to be made on June 30th and that's what the Greek authorities have said publicly," fund spokesman Gerry Rice said.
Greece's repayment schedule
- June 30: IMF repayment, 1.5 billion euros
- July 10: Greek Treasury T-bill redemption, 2 billion euros
- July 13: IMF repayment, 450 million euros
- July 17: Greek T-bill redemption, 1 billion euros
- July 20: ECB and national central banks repayments, 3.5 billion euros
- August 1: IMF coupon payment, 175 million euros
- August 7: Greek T-bill redemption, 1 billion euros
- August 20: ECB and national central banks repayments, 3.2 billion euros
- September 4: IMF repayment, 300 million euros
- September 4: Greek T-bill redemption, 1.4 billion euros
New plans submitted Sunday by Greece aim make 8 billion euros ($11.6 billion) in savings, mostly through new taxes on the wealthy and businesses, VAT increases and a cut in defence spending.
But in counter-proposals handed to Greece on Wednesday, creditors are calling for further measures on retirement, VAT for restaurants, and for defence expenditure to be slashed by 400 million euros ($578 million) instead of the proposed 200 million euros ($289 million).
Greece's banking system has been kept afloat by cash injections from the ECB as wary Greeks withdraw their deposits.
But on Thursday, the Bank of Greece did not request extra liquidity from the ECB, reflecting a stabilisation in the withdrawals.
Athens has also warned any accord would need to be approved by parliament before June 30, which risks splitting Mr Tsipras's Syriza party, where many on the left wing view him as reneging on campaign promises.
Any Greek agreement will also need to deal with what comes next, with EU officials suggesting an extension of the bailout until the end of the year, followed by a possible third aid package to keep Greece afloat.
From other news sites: