Greek PM tears into lenders as euro zone prepares for 'Grexit'

Default, Grexit loom

(L-R) Eurogroup Chairman Jeroen Dijsselbloem, European Parliament President Martin Schulz, European Council President Donald Tusk and European Commission President Jean Claude Juncker pose for a group photo at the end of a meeting in Brussels, Belgium, June 16, 2015. [Photo/Agencies]

Greece is set to default on a 1.6 billion euro ($1.8 billion) debt repayment to the International Monetary Fund on June 30 unless it receives fresh funds by then, possibly driving it towards the exit of the euro zone.

That could begin if the government had to impose capital controls to stem a bank run and was obliged to pay wages, pensions and suppliers in IOUs because of a shortage of euros.

Lawmakers in Merkel's conservative party and her center-left coalition partners were more blunt than the chancellor in warning that a Greek euro zone exit was on the cards.

"In the event a solid reform package is not presented, then a 'Grexit' would have to be accepted if necessary," said Michael Grosse-Broemer, a senior lawmaker in Merkel's Christian Democrats. "I'm not so sure any more if the Greek government is really interested in averting damage for the people of Greece."

Finnish Prime Minister Juha Sipila, whose country is among the most hawkish creditors, said it would take "a miracle" to reach a solution next week, but that was still everyone's aim.

European Commission Vice-President Valdis Dombrovskis said publicly that euro zone members were discussing what might happen if Greece failed to agree on a deal with lenders.

The bloc has no legal basis for forcing a country out, but Athens might end up with a de facto parallel currency, paving the way for a formal exit from the euro.

Though all sides - Athens and the European Commission, European Central Bank and IMF - want to avoid such a scenario, all have dug themselves into entrenched positions blaming the other side for the collapse of talks at last weekend.

With trust between the two sides now badly damaged, there were fears the situation could slip out of control.

"What is absolute, is that the timeframe is very tight now and even with the best will in the world, on tight timeframes accidents can happen," Irish Finance Minister Michael Noonan told a parliamentary committee in Dublin.

Officials from the Eurogroup Working Group held a conference call in the afternoon to prepare the ground for Thursday's finance ministers meeting, but no new progress was made, according to sources.

EU officials denied reports that any emergency summit of euro zone leaders was being planned for next Sunday. If anything, the Eurogroup finance ministers might meet again. 

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