BRUSSELS (AP) — European creditors issued Greece with an ultimatum Monday, saying the country must accept a key condition in bailout talks by the end of the week or face having to meet its debt commitments on its own — a prospect that many in the financial markets think would leave Greece little option but to leave the euro.
After a meeting of the 19 finance ministers of the eurozone over how to make Greece's debts sustainable broke down in seeming-acrimony after barely more than three hours, Greece was told it has to ask for an extension to its bailout program before further negotiations on the country's future financing and economic course can take place.
"We simply need more time and the best way for that at this point is extend the current program which would allow a number of months for us to work on future arrangements," said Jeroen Dijsselbloem, the head of the so-called eurogroup.
Without some sort of financing arrangements in place after the current bailout ends after Feb. 28, Greece would face real difficulties meeting its obligations, such as debt repayments, over the coming months. Bankruptcy and a potential exit from the euro would loom for Greece once again.
That's why investors grew increasingly concerned Monday that a deal may not emerge in time to avoid a so-called "Grexit" from the euro — the main stock market in Greece fell 3.8 percent while the euro slipped.
Investors are worried that the two sides are poles apart especially as a cornerstone of the election campaign of Greece's new left-wing government was to scrap the bailout program. In return for 240 billion euros ($275 billion) of rescue money from 2010 onwards, successive Greek governments have had to implement a wide array of austerity measures such as deep cuts to spending and pensions.
The new Syriza government, in power for barely three weeks, blames those measures for the country's economic ills — the Greek economy is around a quarter smaller than in 2008, despite a recent modest return to growth while unemployment and poverty have swelled.
"It would be an act of subterfuge to promise to our partners to complete successfully a program we challenged the logic of," Greece's finance minister, Yanis Varoufakis, said.
And despite the talk of deadlines, Varoufakis insisted a deal between the two sides was achievable and that visible progress could still be made within the next 48 hours despite Monday's swift breakdown in discussions.
"We are ready and willing to do whatever it takes to reach an agreement over the next two days," he said. "Europe will do the usual trick: It will pull a good agreement or an honorable agreement out of what seems to be an impasse .... I have no doubt that, within the next 48 hours Europe is going to come together and find phrasing that is necessary so we can submit it and move on to do the real work that is necessary."
For all his talk about deadlines, Dijsselbloem also said there was scope for compromise provided the Greek government commits to the broad outlines of the current program, such as maintaining tight budgetary discipline.
He added that he thought it was "still feasible" that Athens would ask for an extension.
"The request for an extension only commits to one thing: that you keep to the broad lines of the program," he said.
However, his suggestion that there was "some flexibility" built in the bailout program met with a fair degree of ambivalence from Varoufakis, who said it was a "nebulous" turn of phrase.
Varoufakis said he had been "perfectly happy to sign there and then" a plan proposed by Pierre Moscovici, the European Commission's monetary and economic affairs official. Details of the plan were sketchy but did apparently involve Athens putting on hold its anti-austerity measures in return for loans and the start of a 6-month negotiation to a future financial arrangement.
"We were offering to refrain from implementing our program for six months and all we were getting back was a nebulous promise of some flexibility that wasn't specified," Varoufakis said.
Malta's finance minister, Edward Scicluna, worried about the implications of a failure by Athens to request an extension: "Then we won't meet. There won't be anything. It will be a disaster."
Derek Gatopoulos in Athens contributed to this report.