International Monetary Fund chief Christine Lagarde warned Athens Thursday it cannot delay a huge payment due at the end of the month, piling on the pressure as eurozone ministers sought a deal on the Greek debt crisis.
Lagarde laid down the law as German Chancellor Angela Merkel said she was still convinced an agreement was possible to save Greece from defaulting and crashing out of the euro if Athens made concessions.
Europe\’s main stock markets fell as euro area\’s finance ministers poured cold water on hopes that their meeting in Luxembourg could end the stand-off between the anti-austerity Greek government and its creditors.
"There will be no period of grace," Lagarde told reporters in Luxembourg. "I have a term of June 30 — if it\’s not paid by July 1, it\’s not paid."
The crisis is nearing a climax with Greece\’s international bailout due to end on June 30 before Athens gets the last 7.2-billion-euro ($8.1 billion) tranche, and without a deal it will be unable to pay the IMF.
Greece had bought itself some time earlier by bundling four looming IMF loan payments into one 1.6-billion-euro lump sum to be paid by the end of this month — becoming the first country to use such a facility since Zambia in the 1980s.
Creditors are withholding the last part of the bailout until Athens comes up with further reforms, but leftist Prime Minister Alexis Tsipras has refused to make changes to pensions and VAT rates.
Merkel, Europe\’s most powerful leader, told the Bundestag lower house of the German parliament that a cash-for-reforms agreement could still be reached.
"I am still convinced — where there\’s a will, there\’s a way. If the political leaders in Greece demonstrate this will, then a deal with the three institutions is still possible," Merkel said.
"It remains the case that Germany\’s efforts are aimed at keeping Greece in the eurozone."
But hopes that Thursday\’s Eurogroup meeting could produce a breakthrough dimmed, with the issue likely to go to the wire at a summit of EU leaders in Brussels next Thursday and Friday.
"I am not extremely hopeful for today to be honest," Finland Finance Minister Alex Stubb said.
Greek Finance Minister Yanis Varoufakis made no comment as he arrived, having said on Wednesday that he did not think a deal was possible on Thursday.
EU Economic Affairs Commissioner Pierre Moscovici referred to the 200th anniversary on Thursday of the Battle of Waterloo, telling reporters in Luxembourg: "I certainly don\’t want this to be a \’Battle of Waterloo\’ with the whole of Europe against one state."
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.
And in a sign the EU\’s top financial brass are also seriously considering the possibility of a "Grexit", the head of Germany\’s central bank, Jens Weidmann, said it would "change the character of the monetary union" — but not destroy it.
Thousands of protesters rallied in Athens on Wednesday night to protest against the demands for further cuts.
Underscoring growing global concern about the fallout from the crisis, US Federal Reserve Chair Janet Yellen warned the world economy could see significant "disruptions" if Greece and its creditors failed to reach a deal.
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.
Elected in January on a vow to end five years of bailout-imposed austerity, Tsipras said Wednesday that an EU "fixation" with pension cuts would scupper a deal and harm Europe as a whole.
The strategic implications of a Greek euro or EU exit have weighed heavily on European calculations, with fears that Russia could increase its leverage in southern Europe amid the crisis in Ukraine.
Alarm bells rang in Europe on Thursday when Tsipras visited Russia where he will be the star guest at President Vladimir Putin\’s investment drive forum in Saint Petersburg.