Greek talks postponed to Saturday

“The institutions informed us that on a number of issues there is still a wide gap with the Greek authorities,” Dutch finance minister Jeroen Dijsselbloem, who chairs the Eurogroup, told reporters.

Greece’s creditors - the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) - will now be tasked with assessing the latest offer from the Greek government, which was tabled just moments before the start of the meeting.

“In the meantime, the door is still open for the Greek authorities to accept the proposals tabled by the institutions”, he added.

At the heart of the disagreement remains the balance of tax increases and spending cuts needed to raise an extra €8 billion in 2015 and 2016, with the two sides divided on the scale of changes to pension contributions and new taxes on businesses and corporations.

Meanwhile, Greek sources indicated the creditors’ proposal - that Greece should find €400 million in new cuts on defence spending - would be particularly tough for Syriza’s coalition partners, the right-wing Independent Greeks party, to accept.

Speaking earlier at the pre-summit meeting of her centre-right EPP group, German chancellor Angela Merkel stated that an agreement would have to be reached over the weekend. Germany "would not be blackmailed," she added.

For their part, Greek ministers sounded a more optimistic note.

"The institutions are going to look again at the two documents - our documents and their own. There will be discussions with the Greek government, and we'll continue until we find a solution," finance minister Yannis Varoufakis told reporters.

"European history is full of disagreements, negotiations, and then compromises," said Greek prime minister Alexis Tsipras as he arrived at the EU summit.

A variety of contingency plans are now being hastily being drawn up to avoid Greece running out of money next week.

Paying the IMF bill

Should Greece be unable to scrape together the €1.6 billion needed to honour its repayment to the IMF on 30 June, EU sources indicated the board of the bloc’s Luxembourg-based bailout fund, the European Financial Stability Facility, could be convened to disperse the money.

Another alternative could be for the payment to be financed from profits from the ECB's bond purchase programme.

Assuming that an agreement can finally be brokered over the weekend, the Greek parliament would be reconvened on Sunday to adopt a draft budget proposal putting the package into law.

The German Bundestag could then vote on the package on Monday evening or Tuesday morning.

For its part, the ECB’s governing council is holding daily conference calls to decide whether to increase the emergency liquidity assistance (ELA) available to the Greek banking sector.

The ELA ceiling was left unchanged at €89 billion on Friday after a day of relative calm for Greek banks.

“Yesterday was no problem,” an ECB source noted.

But speculation continues that Greece will soon be forced to impose capital controls to prevent more money flowing out of the country.