For the first time, insiders have revealed that senior eurozone officials have explicitly discussed the possibility of Greek default. The news came as brinkmanship over a bailout deal sent global shares skidding.
"In discussions, a default was mentioned as one of the scenarios that can happen when everything goes wrong," a high-level official told the AFP news agency.
The fact that the eurozone is preparing for a worst-case scenario ratchets up pressure on Greek Prime Minister Alex Tsipras to reach a deal on time.
That pressure seemed to have an effect on Friday. According to one Greek government official, Tsipras had spoken with European Commission President Jean-Claude Juncker on the phone and discussed the next steps of cash-for-reform negotiations.
The official also said that Athens was ready to submit counter proposals to its international creditors - the European Commission, the European Central Bank and the International Monetary Fund - and that last-minute talks would be restarted in Brussels on Saturday.
Half of Germans want Greece out
Greece has less than a week to reach a deal with its creditors or risk default and a possible ejection from the common currency area. The indebted country was given until Friday to come up with a concrete proposal that its lenders could review over the weekend, giving European finance ministers enough time to sign off on it when they convene on June 18.
A deal must be reached by then because some national parliaments want to vote on the measure before doling out money to Greece. The German parliament in particular is acutely aware of wavering public support for propping up the Greek economy.
A poll conducted this week for the broadcaster ZDF found that 70 percent of Germans were against making any more concessions to Greece's leftist government. Public fears of a Grexit - a Greek exit from the eurozone - are also ebbing, the poll found. Fifty-one percent of Germans want to see Greece kicked out - a near 20-point jump from a poll at the start of the year.
The Athens Stock Exchange Index slipped 4.4 percent on Friday and shares in Greek banks fell as much as 8.8 percent. Returns on Greek bonds crept upward to 25.439 percent.
Europe's main stock markets were also down on Friday. Germany's Dax 30 index lost 1.38 percent to 11,176.72 points. London's benchmark FTSE 100 index lost 0.67 percent and was at 6,800.81 points in afternoon trading. In Paris, the CAC 40 sank 2.05 percent to 4,869.68 points.
Anxiety over a potential Greek debt default also darkened the mood among traders on Wall Street. Five minutes into trade, the Dow Jones Industrial Average fell 0.33 percent to 17,980.09 points, the S&P 500 fell 0.35 percent to 2,101.45 points and the Nasdaq Composite Index lost 0.34 percent to 5,065.34 points.
"Literally every half hour someone speaks to some Greek and announces a breakthrough, a fallout or a suspension" in talks, Sarah Brylewski, a financial expert with the broker Ayondo, told the Reuters news agency.
Her comments underscored the frustration shared by traders around the world and eurozone finance officials as talks with Athens on a debt agreement appeared to hit an impasse - again.
Deal sans IMF "unimaginable"
Speaking to business leaders gathered in Berlin on Friday, German Chancellor Angela Merkelappealed to all parties
to continue negotiations.
"Where there's a will there's a way, but the will has to come from all sides," she said. "That is why I think it's right that we talk to each other again and again."
A negotiating team with the IMFabruptly left Brussels on Thursday
, frustrated with what they saw as Athens' unwillingness to accept the conditions required to unlock further aid and loosen curbs on how much it can borrow in short-term debt before a 1.6 billion euro ($1.8 billion) IMF loan repayment is due at the end of June.
Asked whether the sudden affront was tantamount to the IMF leaving the talks, European Commission President Jean-Claude Juncker said "I do not think you can interpret the move by the IMF as meaning that the IMF is pulling out of negotiations."
Striking a similar tone, Eurogroup chief Jeroen Dijsselbloem said Friday that a bailout deal for cash-strapped Greece without IMF involvement would be "unimaginable."
cjc/hg (AFP, Reuters, dpa)