Greece talks collapse, as clock ticks to default

"While some progress was made, the talks did not succeed as there remains a significant gap between the plans of the Greek authorities and the joint requirements of Commission, ECB and IMF," the Commission sad in a statement.

That leaves Greece at the brink of a default at the end of the month if no solution is found to unblock a €7.2 billion loan before the end of the current bailout programme on 30 June.

On that day Greece must also repay €1.6 billion to the IMF, and it is unclear if the country will have enough liquidity.

Over the weekend, the Greek negotiating team, headed by state minister Nikos Pappas, submitted three proposals to the creditors' side represented by Martin Selmayr, the chief of staff of commission president Jean-Claude Juncker.

But the proposals did not meet the creditors' demands on pension reforms and VAT levels and would make Greece fall short of completing its budget targets by €2 billion a year unless other savings are found, according to EU sources.

"This is very disappointing and sad. It was a last attempt to bridge our differences but the gap is too large. One can discuss a gap, but this is an ocean," said a source quoted by the Reuters news agency.

In a column published in Germany’s Bild on Monday, German vice-chancellor Sigmar Gabriel warns that “the shadow of a Greek exit from the euro zone is becoming increasingly perceptible”.

The failure of the talks at a technical level leave EU leaders as the last resort.

Now that an agreement endorsed by the eurozone Finance minister at Thursday’s (18 June) Eurogroup meeting looks almost impossible, the onus will be on EU leaders when they meet a summit on 25 and 26 June.

Greek prime minister Alexis Tsipras and his ministers have repeatedly said that they wanted a political agreement.

"The decision is now not in the hands of the institutions, which in any case - with the exception of the European Commission - are not elected and are not accountable to the people, but rather in the hands of Europe’s leaders," Tsipras wrote in an op-ed published by Le Monde newspaper in May.

Faced with growing opposition from the hard-left in his party, the Greek PM needs to show that he fought to the last minute and forced concessions from his creditors and EU partners.

But the Greek government has also a more fundamental aim stopping austerity measures and getting debt relief.

This is something Greece creditors have not yet considered.

"We don't want any more money," Greek Finance minister Yanis Varoufakis said in an interview to Bild on Monday.

Varoufakis asked for a restructuring of Greek debt and appealed to German chancellor Angela Merkel to personally get involved.

"An agreement could be reached in one night. But the chancellor would have to take part," he said.

What to do with Greek debt has been dividing the country's creditors - the EU, the European central bank (ECB) and the International monetary fund (IMF).

The EU has been ready to accept lower targets for the budgetary primary surplus and less cuts in pensions, provided that savings are found elsewhere. But a debt haircut has been ruled out for financial and political reasons.

 The IMF said that the Greek debt would not be sustainable if surplus targets are too low and pensions not dramatically reformed.

In a blog post published on Sunday, IMF's chief economist Olivier Blanchard warned that "a credible deal will require difficult decisions by all sides".

"On the one hand, the Greek government has to offer truly credible measures to reach the lower target budget surplus, and it has to show its commitment to the more limited set of reforms," Blanchard wrote.

"On the other hand, the European creditors would have to agree to significant additional financing, and to debt relief sufficient to maintain debt sustainability," he added.

"We believe that, under the existing proposal, debt relief can be achieved through a long rescheduling of debt payments at low interest rates. Any further decrease in the primary surplus target, now or later, would probably require, however, haircuts."