World Economy

Greek Debt Talks Fail

Greek Debt Talks FailGreek Debt Talks Fail

Crunch European talks to end the standoff over Greece's debt ended without a deal on Thursday, as the IMF claimed future discussions required “adults in the room” to yield a breakthrough in an apparent swipe at Greek officials.

The clock ticked closer to midnight on the crisis after eurozone finance ministers meeting in Luxembourg failed to reach a breakthrough on a reform deal that could avert a catastrophic Greek exit from the euro, AFP reported.

"No deal at Eurogroup," Valdis Dombrovskis, the European Commission vice-president for the euro, said after the talks broke up after 90 minutes of discussion on Greece. He said it was a "strong signal for Greece to engage seriously in negotiations". One source described the talks outcome to AFP as "tragic".

EU President Donald Tusk quickly announced an emergency summit of the leaders of the 19 eurozone countries on Monday in Brussels, saying it was "time to urgently discuss the situation of Greece at the highest political level".

The summit comes before a meeting of all 28 EU leaders on Thursday and Friday.

Leftist Prime Minister Alexis Tsipras has refused to make reforms to pensions and VAT rates demanded by the creditors in exchange for extending Greece's huge EU-IMF bailout.

Creditors have refused to pay the remaining €7.2 billion ($8.1 billion) of the bailout if there is no reform deal, and the cash will be lost forever if there is no deal for an extension.

Greece has another 6.7 billion euros due to the European Central Bank in July and August and there have been reports of planning for possible capital controls if Greece's financial system runs dry.

Greek 'Catastrophe'

Eurogroup chief Jeroen Dijsselbloem told a press conference that time was running out and said the "ball is clearly in the Greek court".

Economic Affairs Commissioner Pierre Moscovici meanwhile urged a "reasonable compromise" to avoid a "catastrophe" involving Greece.

Failure to get the bailout cash would leave Greece unable to repay 1.6 billion euros to the IMF on June 30, the same day that the bailout expires.

IMF chief Christine Lagarde, who had earlier warned that there would be “no period of grace” for Greece if it failed to make the repayment, issued a stinging rebuke to the Greek government shortly after news of the failed talks broke.

Greek Finance Minister Yanis Varoufakis, the motorbike-riding former economist whose relations with his counterparts have been strained, said he wanted to "replace costly discord with effective consensus".

Plan B

Without the bailout tranche and the IMF deadline missed, Greece would be for the first time in five years financially alone, with its coffers empty and all eyes on what happens next.

"The other option is to prepare the B plan," said Irish Finance Minister Michael Noonan, adding that he did not fear any "contagion effect" in the case of a "Grexit" -- meaning Greece crashing out of the euro.

Finnish Finance Minister Alex Stubb added: "Option number 1 is extension .... Option B could be default."

Greece's central bank warned for the first time Wednesday that the country could suffer a "painful" exit from the single currency area–and even the European Union–if it fails to reach a deal.

Thousands Rally

Thousands of Greeks rallied outside parliament in central Athens to urge the government to reach an agreement with its creditors that will keep the country inside Europe’s monetary union.

Demonstrators climbed the steps leading up to the parliament, draping the walls with Greek flags and surrounding the ceremonial guard at its base. “I’m here to support the cause of staying in Europe,” said Spyros Kasimatis, 61. “The ripple effects would be disastrous, but it’s difficult to explain this to the unemployed youth.”

The consequences of leaving the euro “would be absolutely catastrophic–the worst since the Asia Minor Catastrophe,” said Kasimatis, who’s a history teacher, referring to the mass expulsion of Greeks from what is now Turkey after an unsuccessful invasion in the aftermath of World War I.