Greece hopeful of last-ditch deal despite default warnings

Greece on Friday insisted a last-ditch deal on its debt was possible and dismissed “terror scenarios” of a default that is looking increasingly likely, as emergency European meetings continue in a bid to break the deadlock.

“Those who invest in crisis and terror scenarios will be proven wrong,” Prime Minister Alexis Tsipras’ office said, amid reports that Greeks banks are struggling to cope with a rush of deposit withdrawals, fuelled by the ill-tempered EU-IMF talks.

The European Central Bank will hold an emergency session on Friday to discuss additional liquidity following a request from the Bank of Greece, sources familiar with the matter told AFP.

A billion euros were withdrawn from Greek banks on Thursday, financial website euro2day reported.

And EU President Donald Tusk has called an emergency summit of the leaders of the 19 eurozone countries in Brussels next Monday after finance ministers on Thursday failed to break the five-month deadlock between the anti-austerity government in Athens and its EU-IMF creditors.

The Athens stock exchange on Friday was alternating between small gains and losses.

In a move that seemed calculated to irk other European leaders amid tensions with Russia over Ukraine, Tsipras was visiting Saint Petersburg as the star guest at President Vladimir Putin’s investment drive forum.

The Greek and Russian leaders were due to hold talks Friday, as Moscow and Athens signed a preliminary agreement to set up a joint venture to extend the TurkStream pipeline through Greece, a long-term project which the Greek government hopes will translate into an upfront payment of some sort.

Greece has until the end of June to agree a reform deal in order to secure the remaining portion of its multi-billion-euro bailout, which it needs to avoid defaulting on a 1.6-billion-euro IMF debt payment.

Analysts have long warned that a default may set off a chain of events leading to a so-called Grexit — Greece leaving the eurozone.

Tsipras warned in an interview with an Austrian newspaper on Friday that a Greek exit would be “the beginning of the end” of the euro.

“The famous Grexit cannot be an option either for the Greeks or the European Union. This would be an irreversible step, it would be the beginning of the end of the eurozone,” Tspiras told the Kurier daily.

Tsipras’ own office was more conciliatory, adding in Friday’s statement: “We hope that the final negotiations take place at Europe’s highest political level and we are working toward the success of this summit.”

The crisis has caused global worries, with the US State Department calling for all parties to reach a solution.

One source described the 90-minute Eurogroup talks on Thursday as “tragic”, saying that Greece had not even raised the issue of a possible bailout extension.

Creditors have refused to pay the remaining 7.2 billion euros of the bailout if there is no reform deal, and the cash will be lost forever if there is no deal for an extension.

On Wednesday the Greek central bank warned that the cash-strapped country could crash out of the eurozone and even the European Union if it failed to reach a bailout deal.

Greece owes another 6.7 billion euros to the European Central Bank in July and August and there have been reports of planning for possible capital controls if Greece’s financial system runs dry.

Tsipras was elected in January on a promise to end five years of austerity under two international bailouts since 2010.