European Council president Donald Tusk called an emergency session of the continent’s leaders on Friday when finance ministers failed to persuade Greece to continue economic reforms in return for financial support.
“It is time to urgently discuss the situation of Greece at the highest political level,” Tusk said.
The crisis summit was scheduled for Monday.
Christine Lagarde, head of the International Monetary Fund — which jointly administers Greece’s bailout with the European Union — told reporters, “We can only arrive at a dialogue with adults in the room.”
Thursday’s meeting of finance ministers was seen as Greece’s last chance to secure the final €7.2 billion tranche of its €240 billion bailout program.
The Balkan state’s far-left government’s insistence on relief from the austerity measures to which the aid is tied doomed any chance of a deal.
Specifically, Greece plans to raise the minimum wage, restore collective bargaining and cancel pension cutbacks and privatizations. Such policy changes would violate the commitments previous Greek administrations made in order to qualify for financial support.
Pierre Moscovici, the European economy commissioner, blamed Greece for the impasse. “We’re waiting for credible counterproposals from the Greek government and they were not delivered today,” he said.
The bailout expires later this month when Greece is due to repay a €1.5 billion loan from the IMF. Another €3.5 billion in bond redemptions is due in the middle of July. Without another support program, it is extremely doubtful Greece could find the money to make good on these commitments.
If Greece defaults on its debt obligations, it will likely have to impose capital controls to stave off a bank run. That could be the first step toward a Greek exit from the eurozone.
A bank run already seems to be underway in slow motion. In the last few days alone, Greek savers have taken up to €2 billion out of their bank accounts. Usually, only between €200 and €300 million is withdrawn on a given day.
The European Central Bank has so far provided extra liquidity to keep the Greek banks afloat. But if there is no deal on Monday, the bank would be hard-pressed to justify continuing this support.