Eurozone to hold emergency summit Monday on Greek bailout

Eurozone leaders will hold an emergency summit on Monday to try to avert a Greek default after no deal emerged from a meeting Thursday of the 19 eurozone finance ministers. 

Cash withdrawals from Greece have accelerated and government revenue is scarce 12 days before Greece must make a crucial debt repayment to the International Monetary Fund.

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"Regrettably ... too little progress has been made. No agreement is in sight," Jeroen Dijsselbloem, chairman of the Eurogroup, told a news conference after the meeting. Ministers sent a strong signal that it is up to Greece to make new proposals, he said.

European Council President Donald Tusk said in a statement he had summoned heads of state and government of the euro area to meet in Brussels at 1700 GMT on Monday.

"It is time to urgently discuss the situation of Greece at the highest political level," Tusk said.

German and EU officials dismissed a German newspaper report that the creditors were preparing to extend Greece's bailout programme until the end of the year without IMF involvement. The IMF is owed 1.6 billion euro ($2.2 billion Cdn) by the end of June and head Christine Lagarde has said she won't extend the deadline.

Pulling money out of the bank

Greek savers pulled out some two billion euros ($2.8 billion Cdn) between Monday and Wednesday after weekend negotiations collapsed in Brussels, senior banking sources told Reuters. That is double the amount that the European Central Bank granted Greek banks in extra emergency liquidity assistance (ELA) this week.

If deposit flight continues to outpace ELA, it could force Greece to impose capital controls, as Cyprus did in 2013, to ration cash withdrawals and stop money fleeing the country.

The 2 billion euros taken out in just three days represents about 1.5 pe rcent of total household and corporate deposits of 133.6 billion euros held by Greek banks as of end-April.

A finance ministry spokesman declined comment on the latest capital outflows. A government spokesman said on television late on Wednesday there was no plan to introduce controls.

Greek PM Alexis Tsipras, elected on a promise to end austerity, is demanding a "political level" bargain in which European creditors promise Greece debt relief before he will make any more concessions.

But the deposit flight and revenue slump may force him to climb down, with the Greek central bank warning of economic catastrophe if Greece defaults and leaves the eurozone.

Tax revenues dropping off

Athens reported a steep 24.6 per cent fall in its revenues in May, including a 50 per cent fall in tax returns, even though the central government posted a primary surplus before debt service in the first five months of this year.

Finance ministry officials said it was mainly due to a slump in tax payments by companies, hard hit by a return to recession.

Lagarde closed one of Greece's last potential escape hatches, declaring that the global lender would consider Athens in default if it misses the June payment, despite reports there might be some leeway.

"It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do," Lagarde told reporters in Luxembourg. "There is no grace period or two-month delay, as I have seen here and there," she said.

Greece confirmed on Wednesday that the government does not have the money to repay the IMF loan, which is the first in a series of debt repayments over the summer.

German Chancellor Angela Merkel said a deal was still possible to provide Greece with additional funds, if Athens showed the necessary will. French Finance Minister Michel Sapin also spoke optimistically at the Luxembourg talks.

Greek PM off to Russia

But Tsipras, pointedly visiting Russia at a time of sour relations between Moscow and the EU, insisted creditor demands for pension cuts would worsen the economic crisis.

In a guest column for Der Tagesspiegel newspaper in Berlin, he sought to dispel what he called a "myth" that German taxpayers were paying Greek pensions and wages.

"The blind insistence of cuts (in pensions) in a country with a 25 per cent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation," he said.

A combination of a default and capital controls could set Greece on a path out of the euro zone and even the EU itself, the Greek central bank warned this week. It would be the first country to leave the currency area or the Union.

For its part, Russia quashed speculation that President Vladimir Putin — at loggerheads with the West over Ukraine — would ride to Greece's rescue. A deputy finance minister told Reuters there had been no request for money from Greece, and Russia had no resources for such a bailout.