BRUSSELS -- The central bank of Greece warned Wednesday that the country was on the verge of default and economic turmoil on the eve of a meeting of eurozone finance ministers aimed at quelling the long-running crisis.
The ministers from the 19 states that use the euro were set to gather in Luxembourg in an atmosphere of emergency as they faced the prospect that Greece could become the first country to fall out of the single European currency, introduced more than 15 years ago as a flagship for the region's integration.
The rare public statement by the Bank of Greece appeared to be an attempt to accentuate concerns about the worsening rift between Athens and its international creditors. There are only two weeks to go before the current Greek bailout program expires and a giant repayment to the International Monetary Fund falls due.
No deal between the sides "would 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," the Greek central bank said. That could lead to an "acute exchange rate crisis" that "would send inflation soaring."
A "deep recession" would follow including "a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved" during its membership of the European Union and the single currency, the Greek bank said.
The goal of the current round of negotiations, underway since February, is to unlock billions of euros of frozen bailout funds for Greece to pay salaries and to service its bailout loans. But those talks have deadlocked while the leftist government in Athens resists overhauls to its tax and pension systems that it says would renege on its promises to ease years of austerity.
Werner Faymann, the chancellor of Austria, told the public broadcaster there that he would use a visit to Athens on Wednesday to push for a compromise between Greece and its lenders and to assure the Greek people "there is solidarity" with their plight.
But a senior European Union official suggested that chances of a breakthrough this week were negligible.
"The ball, I think ministers will firmly conclude, is very firmly in the Greek camp," said the official, who spoke only on the condition of anonymity as is customary before meetings of eurozone ministers.
"There are so many gaps between the institutions and the Greek authorities," the official said, referring to the three institutions overseeing Greece's compliance with the terms of its bailouts -- the European Commission, the European Central Bank and the IMF.
There was "not only a fiscal gap" but also gaps "very much to do also with the structure of the tax system, with pensions," the official said.
Investors were waiting to learn if, in the absence of progress, the European Central Bank would begin reducing its support for the Greek financial system, which it has effectively been keeping on life support with an emergency funding program. Greece was certain to be a priority at a regular meeting of the central bank's Governing Council expected late Wednesday.
The intensifying rift between Athens and the creditors on Tuesday prompted Jacob J. Lew, the U.S. Treasury secretary, to call Prime Minister Alexis Tsipras of Greece to be briefed on developments that could have repercussions across the financial system.
Large demonstrations against austerity in Greece have largely subsided under the leftist government. But a protest against the additional measures being sought by creditors was planned for Wednesday evening. A prominent Cabinet member, the social security minister Dimitris Stratoulis, called on Greeks to join the rally in a message on his Twitter account earlier this week.
If ministers fail to reach a deal with Greece today, there could be an emergency meeting of eurozone leaders in Brussels before a summit meeting of the 28 European Union leaders on June 25.
Business on 06/18/2015