Greece crisis: Risk of Greek euro exit rises as Brussels talks fail to agree last-minute deal

Greece is demanding more time to pay and the cancellation of some of its debt, while its lenders want to see pension reforms, higher VAT and a promise to target a primary budget surplus

Greek Prime Minister Alexis Tsipras (AFP/Getty)

Germany has given its most explicit warning that Greece could leave the eurozone as officials were reported to have failed to hammer out a last-minute deal in Brussels.

On Sunday night, a EU Commission official, who refused to be identified because of the sensitivity of the negotiations, said that “the talks did not succeed as there remains a significant gap between the plans of the Greek authorities and” the demands of the international creditors.

On top of that, the official said that, for the EU’s executive, “the Greek proposals remain incomplete.” The official refused to be more precise.

“The shadow of a Greek exit from the eurozone is becoming increasingly perceptible,” Germany’s Economy Minister and Vice-Chancellor, Sigmar Gabriel, wrote in Bild newspaper. “Greece’s game theorists are gambling the future of their country and Europe’s too.”

Greece’s Prime Minister, Alexis Tsipras, sent a delegation to Brussels for talks with European President Jean-Claude Juncker’s office. But hopes for a breakthrough on measures demanded by Greece’s lenders faded, with both sides taking increasingly hardline positions, according to EU officials.

Greece is demanding more time to pay and the cancellation of some of its debt, while its lenders want to see pension reforms, higher VAT and a promise to target a primary budget surplus.

Officials from the major lenders, the International Monetary Fund and European Central Bank, had been standing by to join the talks if Mr Juncker’s office made progress. Greece’s Finance Minister, Yanis Varoufakis said that the liquidity squeeze was asphyxiating the economy.

He said: “When you go into negotiation, you compromise. We’ve compromised a lot. The target … is to get out of the crisis. For that you need Greece to go back to markets, so a restructuring of debt is needed.”

Greece must repay €1.6bn ($1.8bn) to the IMF this month or default, putting its future in the euro in grave danger. It must also repay €6.7bn when Greek bonds held by the European Central Bank fall due in July and August.