The crunch negotiations between Greece and its EU-IMF creditors have collapsed and left a wide rift that needs to be closed within two weeks to avoid a possible Greek default, the European Commission has said.
An EU Commission official, who refused to be identified because of the sensitivity of the negotiations, said on Sunday that “the talks did not succeed as there remains a significant gap between the plans of the Greek authorities” and the demands of the international creditors.
The last-ditch talks failed in their second day, heaping worry that the cash-starved Greek government was heading irreversibly into a financial abyss with a huge IMF debt payment due at the end of the month.
“They came with their hands in their pockets,” a furious EU source close to the negotiations told AFP news agency, while Greek officials said the failure was the fault of the International Monetary Fund, the country’s most hardline creditor.
“The demands of the creditors are irrational, the discussions lasted 45 minutes,” an irate Greek government source said.
The deadlock drove the euro down in Tokyo morning trade on Monday, with the single currency dropping to $1.1222 and 138.50 yen from $1.1260 and 138.92 yen in New York late Friday.
All sides had agreed that the talks were the last chance for Athens to unlock vital bailout cash in return for tough reforms that Greece’s 40-year-old leftist prime minister, Alexis Tsipras, still doggedly refuses.
The IMF delegation quit negotiations on Greece’s stalled debt talks in Brussels on Thursday.
IMF chief economist Olivier Blanchard on Sunday insisted that Greece must tackle its bloated pension system, which he said accounted for a whopping 16 percent of the country’s economy.
Greece is shattered economically after six year of crisis and despite two rescue programmes since 2010, worth 240 billion euros ($270bn), mostly in loans owed to its European partners, led by Germany and France.
The small Mediterranean nation is now buried under a mountain of debt equivalent to 180 percent of GDP, or almost twice the country’s annual economic output.
Also at the end of the month, Greece faces a huge 1.6 billion ($1.12bn) euro payment to the IMF with another 6.7 billion ($108bn) euros due to the European Central Bank in July and August, which Greek officials have said the government cannot afford.