Greek default fears rise as '11th-hour' talks collapse

Talks aimed at reaching an 11th-hour deal between Greek ministers and their bailout creditors collapsed on Sunday evening after a new economic reform proposal submitted by Athens was deemed inadequate to continue negotiations.

The breakdown is the clearest sign yet that differences between the two sides may be too wide to breach, increasing the possibility that Athens will not secure the €7.2bn in bailout aid it needs to avoid defaulting on its debts - including a €1.5bn loan repayment due to the International Monetary Fund in just two weeks.

Greek negotiators, including Nikos Pappas, aide-de-camp to Alexis Tsipras, the Greek prime minister, left the headquarters of the European Commission only 45 minutes after entering the building for what were characterised as a "last try" by one of the eurozone officials involved in the talks.

A commission spokesman said there remained a "significant gap" between the two sides, amounting to up to €2bn per year, and there was no longer time to reach a "positive assessment" of Greek efforts before a high-stakes meeting of eurozone finance ministers on Thursday.

"While some progress was made, the talks did not succeed," said the spokesman. "On this basis, further discussion will now have to take place in the eurogroup."

That eurogroup meeting is seen by many officials as the last chance for Athens to secure a deal on an agreed list of the economic reforms its creditors are demanding in order to release the €7.2bn aid tranche before Greece's EU bailout runs out at the end of the month.

Asked as he exited the commission headquarters whether the break-off in talks was a bad sign, Mr Pappas told the Financial Times: "We will see."

Without the endorsement of Greece's trio of bailout monitors - the commission, the International Monetary Fund and the European Central Bank - the prospects of an amicable agreement on Thursday is remote, raising the prospect eurozone negotiators may resort to the "take it or leave it" strategy used on Cyprus at a eurogroup meeting two years ago.

On that occasion, an ECB representative warned that without a deal, the central bank would be forced to cut all emergency funding to Cypriot banks - essentially laying waste the country's financial system. There have been similar pressures on the ECB in the past week to take the same stance with Athens.

One senior official involved in the talks said there could still be a compromise on Thursday if Greek negotiators "go back to Athens and say: 'Oh shit, we have to do something'." But the official acknowledged such a U-turn was unlikely.

Yannis Dragasakis, speaking in Brussels on Sunday after the talks broke up, said Athens "remains ready" to complete the negotiations and blamed Greece's creditors for being intransigent in their insistence on pension cuts and increases in the country's value-added tax that Athens believe will hit essential services.

"In spite of the presence of the Geek mission in Brussels, there was no response on the part of the [bailout monitors] for discussions at the same [political] level or authorisations that would permit a solution to the issues that remain open," Mr Dragasakis said.

In a sign of how far attitudes had shifted, Sigmar Gabriel, Germay's vice-chancellor and head of the country's Social Democratic party - long seen as a more conciliatory political group - penned an article for Monday's daily Bild newspaper in which he warned patience towards Greece in Germany was running thin.

"The game theorists of the Greek government are in the process of gambling away the future of their country," Mr Gabriel wrote, in a thinly-veiled dig at Yanis Varoufakis, the Greek finance minister who is also a published expert on game theory. "Europe and Germany will not let themselves be blackmailed. And we will not let the exaggerated electoral pledges of a partly-communist government be paid for by German workers and their families."