The International Monetary Fund dramatically pulled out of talks with debt-stricken Greece on Thursday after it accused Athens of failing to compromise over labour market and pension reforms.
The Washington-based lender of last resort said its team of negotiators had quit talks in Brussels after reaching a stalemate and would be returning to Washington.
The move left the Greek negotiating team with no option but to say it would also be leaving the talks and heading home to Athens.
“The ball is very much in Greece’s court,” IMF spokesman Gerry Rice said. “There are major differences between us in most key areas. There has been no progress in narrowing these differences recently.”
The IMF’s decision followed increasingly sharp criticism from EU officials frustrated at the Greek government’s continued refusal to bow to creditors’ demands.
Donald Tusk, the president of the European Council, earlier attempted to pressure the Greek prime minister, Alexis Tsipras, to agree terms with its creditors, warning that the time for gambling was over.
Tusk, a former prime minister of Poland, intervened in the negotiations over Greek debt repayments as Athens appeared steadfast in key areas of dispute.
Tsipras was due on Friday to resume talks in Brussels with the European commission president, Jean-Claude Juncker, to resolve the ongoing dispute over Athens’ implementation of wide-ranging reforms and steep spending cuts in return for further loans. Such a meeting is now in doubt.
A spokesman for the Syriza-led government said its negotiating team is “ready” to intensify efforts to wrap up a deal “even in the next 24 hours”.
He added: “For that reason it will continue to work on the remaining issues such as fiscal [gap] and debt sustainability.”
Greece has wrangled with creditors over the release of the remaining funds in its bailout. Without the €7.2bn available, Greece faces imminent bankruptcy, putting up capital controls and even exiting the euro.
Tusk warned that unless an agreement is signed in the next few days there is a risk that the talks will collapse and Greece will default on its existing €320bn of loans.
Speaking at the closing press conference for the EU-Latin America and Caribbean Summit, Tusk said that now is the time to decide.
The Greek government has to be, I think, a little bit more realistic. It is very obvious that we need decisions, not negotiations.”
He added: “There is no more time for gambling. The day is coming, I’m afraid, that someone says that the game is over.”
But the IMF’s intervention effectively ended the technical talks over how to reform Greek labour markets and its state pension system, which are at the heart of the dispute.
The IMF managing director, Christine Lagarde, will attend a meeting of eurozone finance ministers in Luxembourg on 18 June, Rice said.
He said the IMF’s door would always remain open if Greece wanted to table meaningful adjustments to its current position. “As our managing director has said many times, the IMF never leaves the table,” he said.
The head of Germany’s central bank, Jens Weidmann, warned that the risk of insolvency was increasing by the day.
“The contagion effects of such a scenario are certainly better contained than they were in the past, though they should not be underestimated,” he said in a speech in London. “But the main losers in that scenario would be Greece and the Greek people.”
Until this week Greece had insisted it could not accept further austerity measures being imposed by Brussels as the price for more loans. But in recent days Greek negotiators have offered some concessions after settling on a limited number of “red lines” – EU/IMF proposals for tough labour market reforms, cuts in state pensions costs and a 1% budget surplus.
On Thursday, the Greek national economy minister, Giorgos Stathakis, revealed that any new deal would include higher taxes
Speaking to state-run TV’s newly relaunched channel, ERT, Stathakis said the government would give the green light to privatisations and emergency levies on middle-income salaries.
Publicly owned assets put up for sale would range from the port of Piraeus to the railway network, TrainOSE and regional airports nationwide, he said.
Analysts said the measures would mean Tsipras rolling back on a raft of pre-election pledges, leaving the leader to count on his unrivalled popularity ratings and the widespread support for his Syriza party to carry him through.
The eurozone’s finance ministers, known as the eurogroup, convene in Luxembourg in a week, a meeting which Tusk says “should be decisive”.
Juncker told Tsipras recently that it was time to push through the gears. “You have to get the cow off the ice, where it keeps on slipping. We are trying to push it off again now,” he said ahead of a meeting with Tsipras.