Time is running out for Greece to avoid default

Chancellor Angela Merkel met the International Monetary Fund's managing director Christine Lagarde in Berlin yesterday for talks dominated by the worsening Greek debt crisis and Athens's race against time to avoid a disorderly default in little over two months time

Their talks followed the German leader's meeting with French President Nicolas Sarkozy on Monday when Ms Merkel revealed that eurozone leaders are considering accelerating capital contributions to the region's bailout fund.

The eurozone's prospects remain clouded by the dire problems facing Greece, which is due to repay €14.4bn (£11.9bn)-worth of bonds by 20 March. Analysts predict, however, that Athens will be unable to meet its bond-redemption target without its creditors approving a second €130bn bail out – part of that deal involves bondholders writing off 50 per cent of Greek bonds' value.

Greece's race to avoid default has saddled Lucas Papademos, the Prime Minister, with a huge challenge. Athens has already received €73bn from an initial bailout package, worth €110bn, approved by the European Union and IMF in May 2010.

The Papademos government hopes the bond write-off part of the agreement will be reached ahead of the EU summit on 30 January. It also aims to have a plan in place for the key structural and economic reforms which the IMF and EU insist are a condition for Greece obtaining its next bailout tranche.