Greece is spiralling towards default with no hope of a deal at its 'last chance' summit

Greece Athens protestMilos Bicanski/Getty ImagesProtesters during a pro-government rally calling on Greece’s European and International Monetary creditors to soften their stance in the cash-for-reforms talks on June 17, 2015 in Athens, Greece

The finance ministers of Europe are about to meet for the last time before Greece’s big International Monetary Fund (IMF) payment is due.

And things aren’t looking good.

“The Eurogroup’s meeting this Thursday could well be the last chance to get any disbursement ready in time for the bundled payment to the IMF on 30 June, but we are not holding our breath,” said analysts at Bank of America Merrill Lynch in a note Thursday morning.

In less than two weeks, Greece owes €1.5 billion ($US1.70 billion, £1.08 billion) to the IMF that the government almost certainly doesn’t have the money to make.

Athens is still in negotiations with its international lenders to unlock billions of euros, which would allow the country to make its debt repayments. But the situation is now a stalemate, with neither side expressing any interest in budging towards an agreement. The creditor institutions want major economic reforms and further austerity, things that the current government was elected in opposition to.

So, as some people have pointed out, the only thing that the two camps currently agree on is that a deal looks pretty unlikely today. Both Greek finance minister Yanis Varoufakis and Eurogroup chief Jeroen Dijsselbloem see very slim chances of a deal.

There’s another €3.5 billion (£2.51 billion, $US3.97 billion) owed to the European Central Bank (ECB) on July 20 — failure to make either payment could cause the central bank to pull the plug on its emergency assistance to the Greek banking sector.

Even if the Eurogroup ministers found a sudden agreement with Greece on Thursday, it would likely take well over a week to complete the process — the structural reforms would have to be approved by Greek parliamentarians, and the bailout would have to be agreed to in parliaments across Europe.

So Greece seems to be hurtling towards a default — not paying the IMF would put the country in a small club, with other members like Sudan and Zimbabwe.

Deutsche Bank’s Jim Reid points out that Greek stocks have now had four consecutive days of decline, a collective fall of 17%. That’s actually greater than the drop when Syriza won January’s election, and leaves Athens equities at their lowest levels since 2012:

It could get worse than that if it looks like the ECB is about to pull the plug — even Greece’s own central bank sounded the alarm yesterday, saying that a “failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and — most likely — from the European Union.”

That painful and dramatic outcome hasn’t looked so realistic in years.

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