Fears that the five-year Greek financial crisis will culminate in debt default and exit from the euro have intensified as Athens hardened its rhetoric against its creditors and insisted it would miss a payment to the International Monetary Fund unless it received debt relief.

With just 48 hours to go before a meeting of eurozone finance ministers, seen as the last realistic chance to reach a deal before Greece has to pay the IMF at the end of June, Alexis Tsipras, showed no sign of bowing to demands for cuts in pensions and increases in VAT. Instead, the Greek prime minister accused the Fund of “criminal responsibility” for the situation and said lenders were seeking to “humiliate” his country.

Tsipras does want a deal, as the alternative is unthinkable Read more

Jean-Claude Juncker, the president of the European commission, reflected the anger in Brussels at the way Tsipras has been approaching the deadlocked negotiations by saying he had “sympathy for the Greek people but not the Greek government”. Juncker was until recently rated as one of Tsipras’s only allies.

EU officials were on Tuesday night making preparations for a crisis meeting of leaders on Sunday if, as now expected, the talks between finance ministers on Thursday prove fruitless. Amid the third straight day of sharp declines on the Athens stock market, EU leaders are for the first time talking openly about Greek default and its ejection from the euro.

Valdis Dombrovskis, vice-president of the commission, said eurozone leaders were discussing “less favourable scenarios” for Greece, while the Finnish prime minister, Juha Sipilä, said an agreement with Greece now would require a miracle. Away from Greece, financial markets had a relatively calm day, suggesting that they have already “priced in” the risk of a Greek default – or still believe a last-minute deal will be struck in Luxembourg.

Angela Merkel stands firm on finding resolution to Greece crisis Read more

Speaking in the Greek parliament, Tsipras called on creditors to reassess the IMF’s insistence on tough cuts as part of the country’s bailout. “The time has come for the IMF’s proposals to be judged not just by us but especially by Europe,” he said. “Right now, what dominates is the IMF’s harsh views on tough measures, and Europe’s on denying any discussion over debt viability. The fixation on cuts ... is most likely part of a political plan ... to humiliate an entire people that has suffered in the past five years through no fault of its own.”

Earlier, it emerged Greece was threatening to miss the 30 June deadline to make a €1.6bn (£1.15bn) debt repayment to the IMF this month, after previously bundling up four separate scheduled June payments into one.

“The government will not pay the IMF, if by the end of the month an agreement hasn’t been achieved with lenders,” Tsipras is reported to have told the opposition party leader, Stavros Theodorakis, during talks between the two in Athens today. Some observers in Greece said that Tsipras was holding out the prospect of a compromise in which he would deliver some of the reforms sought by the troika of the IMF, the European Central Bank and the European commission in return for debt relief. The IMF believes that debt relief is part of a long-term solution to Greece’s problems.

But with the relationship between Greece and its partners at its lowest ebb since Tsipras became prime minister five months ago, the eurozone and the commission said they will only negotiate if Greece tables serious new proposals on fiscal targets, including pensions reforms and liberalisation of the labour market. Yanis Varoufakis, the Greek finance minister, said he would not take any new proposals to Luxembourg and challenged the legitimacy of the negotiations.



Eurozone braces for Greek exit as Athens threatens to miss IMF payment Read more

Speaking to Germany’s Spiegel newspaper, Varoufakis said the proposals for spending cuts and reforms were already so harsh and brutal the Germans themselves would never accept them. He said: “Greece will only commit to them if Europe agrees to a debt restructuring, investments and an end to the liquidity crisis.” Asked if an agreement would be reached this weekend he said: “Ask Merkel.”

There is an EU summit in Brussels on Thursday and Friday next week. The summit has to grapple with major issues such as David Cameron’s in/out referendum on the EU, sanctions on Russia, and the Mediterranean refugee emergency. Leaders, especially Merkel, do not want next week’s summit hijacked by Greece. But that appears inevitable without a breakthrough.

Refusing to pay the IMF would not formally put Greece in default on its huge government debts – since the IMF is not a commercial lender – but it would represent a big step towards that eventuality and open the question as to whether Greece, without an agreement with the eurozone, will be able to redeem more than €3bn of bonds at the European Central Bank next month.

Without agreement extending the rescue package and freeing up to €19bn in bailout funds tied to Greek reforms, Athens will run out of cash. The German tabloid Bild reported that the Greek government had discovered a way of deferring the IMF payment until the end of the year. Greek officials denied the report.