Greece has put the onus on its creditors to prevent it being forced out of the single currency, warning that an economic collapse on a par with the Great Depression of the 1930s had left it broke and unable to pay its debts.
Athens announced on Wednesday that it had run out of money, and would not be able to pay €1.6bn (£1.15bn) owed to the International Monetary Fund (IMF) at the end of this month, on the eve of a meeting of eurozone finance ministers. The meeting is seen as the last realistic chance of striking a deal before Greece’s current bailout runs out in 12 days’ time.
The warning came as the governor of the Greek central bank said that Greece was on the brink of an “uncontrollable crisis” and warned that leaving the eurozone would also mean “exit … most likely from the European Union”. But the chances of a breakthrough on Thursday’s talks, in an increasingly hostile negotiating environment, were seen as remote.
Greece’s Eurogroup partners have said it would be up to Greece to offer concessions at the meeting, but they think it unlikely that Athens will cross any of its “red lines” despite its desperate financial plight.
“Things will not be so lengthy,” said one official in Brussels. “The ball, ministers will conclude, is very firmly in the Greek camp. I honestly believe this will be pretty short.”
Greek shares fell sharply for a fourth successive day as the UK government said it was making contingency arrangements to minimise the impact on the economy from a default, which the head of the European parliament said would result in Greece having to leave the European Union. not just the single currency.
Euclid Tsakalotos, the chief Greek negotiator in the talks, ruled out any further cuts to pensions and increased the pressure on the IMF, the European commission and the European Central Bank (ECB) – the so-called troika of lenders – to soften their approach to a country that has seen its economy shrink by a quarter in five years.
Earlier this month, Greece said it would bundle up three payments due to the IMF in June and pay them at the end of the month. But Tsakalotos admitted: “At the moment we haven’t got the money.”
The troika has been withholding the last tranche of money from Greece’s second bailout – €7.2bn – until Athens agrees to changes to its economy, but they have deemed unacceptable and counter-productive by the Syriza-led government headed by the prime minister, Alexis Tsipras .
Tsakalotos, in an interview with Reuters, said that without help Greece could
not pay the €1.6bn to the IMF: “There is no financing. We haven’t got access to the markets, we haven’t got money that hasn’t been paid since the summer of 2014, so obviously we won’t be able to pay that.”
He suggested that Athens could be offered debt relief if the European bailout fund – known as the European Stability Mechanism – took over Greek bonds held by the ECB. Tsakalotos said that option would not increase debt for Greece or its partners.
Asked how confident he was that a deal could be done, he added: “I think that question is mostly for [our] European partners now.”
Martin Schulz, president of the European parliament, told the Guardian in an interview that there was no legal avenue for expelling a country from the eurozone and that dropping out of the 19-country eurozone would mean no longer being in the 28-country European Union.
The Lisbon treaty, he said, stipulated that “a member of the European Union is vowed to the euro. All the countries have to introduce, sooner or later, the euro and once you are a member of the eurozone there is nothing legally foreseen to leave the eurozone and to stay in the European Union.”
Schulz is on the centre-left and was the first senior EU politician to visit Athens after Tsipras won the election in January. He accused the Greek leader of misrepresenting his sole allies in Brussels, such as Jean-Claude Juncker. the president of the European commission, who has been trying to mediate in the crisis.
“Juncker made far-reaching proposals. Tsipras was not fair in what he said.”
He accused the Greek leader of putting ideology before pragmatism but insisted the Greeks had to meet the terms of the bailout package that expires in a fortnight.
Schulz’s comments about a Greek exit from the EU were echoed by the country’s central bank governor, Yannis Stournaras. In remarks that infuriated Tsipras, Stournaras, who was appointed by the former centre-right administration, said: “Failure to reach an agreement would … mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union .”
Whitehall contingency planning meetings have focused on the immediate impact of capital controls in Greece – limits on bank withdrawals – that could be introduced to avoid a bank run if Greece appears to be moving towards a default on its debts. There is a particular focus on the tens of thousands of British holidaymakers who travel to Greece during the summer.