The following day, investors were plunged into despair after IMF boss Christine Lagarde told the Frankfurter Allgemeine Zeitung that the exit of Greece from the eurozone was "a possibility", which would "probably not" spell an end for the euro.

Investors concluded that Athens' optimism was more to do with a PR strategy aimed at avoiding a bank run in the lead-up to a long weekend (Monday is a public holiday in Greece) rather than reality.

This interpretation was reinforced by damaging figures released by the European Central Bank last week showing that Greece's embattled banks are experiencing a pick-up in deposit outflows. Total deposits fell to €139.36 billion ($200.25 billion) in April, down from €145.04 billion in March and over €170 billion just five months ago, leaving deposit levels at Greek banks at their lowest level in more than a decade.

The spreading gloom about a Grexit caused the Germany's DAX to fall 3.8 per last week, while France's CAC 40 shed 2.6 per cent. In contrast, the US S & P 500 index fell by a more modest 0.9 per cent in the week.

Negotiations will commence afresh this week aimed at breaking the impasse over what reforms Athens must agree to in order to access its remaining €7.2 billion in bailout funds. Greece's creditors are insisting that the country commit to reforming the pension system, the labour market and the sales tax regime in exchange for the funds, but Tsipras is reluctant to agree for fear of sparking a voter backlash.

As a result, agreement remains elusive. For instance, the IMF is pressing Athens to lift the retirement age to 67 years, Brussels is arguing for a less ambitious number of 65, while Athens wants it to be 62 years.

There are also major disagreements on the size of the primary surplus (which excludes debt servicing) that Athens should be aiming to achieve. Taking into consideration Greece's parlous economic position, Brussels is content with a primary surplus amounting to 1 per cent of GDP in 2015, rising to 2 per cent in 2016 and 3 per cent in 2017. But again the IMF is pressing for more ambitious targets.

From Athens to Paris, and from Berlin to Washington, unless a quick breakthrough in negotiations can be achieved, a Greek default is imminent.


The overwhelming hope is that the two sides can reach agreement before Friday, when Athens is due to repay €300 million to the IMF. Athens claims to have the money to meet this deadline but there are worries that it will not be able to meet three further payments to the IMF later this month totaling about €1.25 billion.

An agreement between Athens and Brussels would also clear the way for the ECB to again accept Greek government bonds as collateral for loans, giving the country access to much-needed liquidity. In addition, Athens may also be able to claim some share of the €1.9 billion in profits that the ECB has made on its on its holdings of Greek bonds since 2010.

But it will be a tense week, starting on Monday when French President François Hollande is due to meet German Chancellor Angela Merkel and the head of the European Commission, Jean-Claude Juncker, in Berlin.

And, more than ever, investors will be scrutinising the body language and decoding the language of leading European officials as they try to anticipate the ultimate denouement of this Greek tragedy.