Grexit: Greek central bank warns of "uncontrollable crisis" if negotiations fail

Joe Hall
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Alexis Tsipras has shown no signs of backing down over reforms (Source: Getty)

The Bank of Greece has warned its government of an "uncontrollable crisis" if it fails to reach an agreement with creditors by the end of the week.

Greece's central bank says such a scenario would kick-off a "painful" course of events that could lead to the country's exit from the European Union, and urged the government to accept a deal offered a fortnight ago.

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No compromise has been reached in bitter negotiations between Greece and its creditors, as Greek shares fell for a fourth successive day on Wednesday and the UK began to make contingency plans for a Greek exit from the eurozone.

Euclid Tsakalotos, a Greek negotiator, admitted Greece did not have the money to pay back the €1.6bn (£1.15bn) due to the International Monetary Fund at the end of this month.

In a report the Bank of Greece said:

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. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability.

The bank added that it "firmly believes that striking an agreement with our partners is a historical imperative that we cannot afford to ignore".

Even US Federal Reserve head Janet Yellen warned in her monetary policy speech that the imminent "difficult and consequential decisions" between Greece and its creditors could "spillover" to the US and affect its outlook.

Greece's hopes of securing €7.2bn in bailout funds in Thursday's Luxembourg meeting look slim, with anti-austerity Prime Minister Alexis Tsipras unwilling to budge on economic reforms.

When asked if there could be an agreement finance minister Yanis Varoufakis said: "I do not believe so".

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