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Greece & Creditors To Play Last Cards

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Greece and its creditors are sticking to their guns as they enter the final act of the drama surrounding the bailout negotiations, but optimism concerning materialization of a deal prevails even as the economic situation rapidly deteriorates.

Eurozone finance ministers are set to hold an extra meeting on Monday, June 22, Eurogroup President Jeroen Dijsselbloem announced Friday. The meeting, which will be held at 3 pm in Brussels, is seen crucial and could be the deciding one for Greece's future with euro.

In some relief for Greece, the European Central Bank Governing Council on Friday raised the emergency liquidity assistance, or ELA, for Greek banks by EUR 3.3 billion, the CNBC reported citing a source, slightly less than what the Bank of Greece had reportedly sought. The bank had held an emergency conference call to review the funding assistance to Greek banks which are facing accelerated withdrawals.

Two days earlier, the ECB had raised the ELA assistance by EUR 1.1 billion, taking the ceiling to EUR 84.1 billion.

The ECB also warned that Greek banks may not open on Monday, Reuters news agency reported, citing officials who took part in the Eurogroup meeting on Thursday.

Deposit flight may force Greece to impose capital controls, becoming only the second country after the neighboring Cyprus to use the measure in the euro area. In 2013, Cyprus imposed capital controls amid a banking crisis and removed them this April.

A Eurogroup meeting held in Luxembourg on Thursday failed to result in any breakthrough for the Greek conundrum that could unlock the crucial EUR 7.2 billion aid for the country.

"Regrettable to say that too little progress has been made in the talks between the institutions and Greece That is no agreement has yet is in sight," Dijsselbloem said at a press conference following the summit.

"We sent a strong signal to the Greek authorities that it's really up to them to submit new, additional proposals in the coming days to fully engage with the institutions."

Greece faces a EUR 1.6 billion payment to the International Monetary Fund on June 30, after the government decided not to make a payment due to the lender on June 5 and sought to bundle the four payments this month into a single payment. Greek government officials suggested this week that the country cannot make the payment without further aid.

It was the first time during the five-year long crisis that the country delayed a payment to the IMF. If Athens fails to strike a deal with its creditors in June, Greece cannot honor the payment due to the lender, leading to a default that could pave the way for the country's exit from Eurozone and even from the EU.

"It is still possible to find an agreement and extend the current programme before the end of this month. But the ball is clearly in the Greek court to seize that last opportunity," Dijsselbloem said.

"Time is really running out. The current programme expires by the end of this month, There are of course parliamentary procedures to consider. Therefore, very little time remains."

German Chancellor Angela Merkel also said this week that a deal was possible, if Greece can scale down its stance.

Meanwhile, the Greek government expressed optimism regarding the Monday summit. "We sought the final negotiations to take place at the highest political level in Europe and we are now working for the success of this summit," the state-backed ANA-MPA news agency quoted government sources as saying on Friday.

"Anyone who invests in the crisis and horror scenarios will be disappointed."

Elsewhere on Thursday, IMF Managing Director Christine Lagarde sought to reach a deal through further dialogue with "adults in the room".

Thousands of Greeks staged protests against the government outside the parliament in Athens on Thursday, and demanded that the country remain in the euro area. More pro-euro demonstrations are planned for the weekend, reports said.

The blame game between Greece and creditors intensified this week and acrimonious remarks came from both sides. Greek Prime Minister Alexis Tsipras said the government cannot accept deeper austerity demands and accused the creditors of humiliating his country.

The anti-austerity leader also placed 'criminal responsibility' on the IMF for the economic problems faced by Greece.

European Commission President Jean-Claude Juncker this week accused Tsipras of presenting twisted versions of the commission's proposals to the Greek public, on matters such as sales taxes. The break down of talks between EU and Greece made the risk of a 'Grexit' more real with several European leaders and policymakers warning the same this week.

Failure to reach an agreement with creditors can put Greece on the 'painful' path of an exit from the euro and spark an uncontrollable crisis, Greece's central bank warned on Wednesday. "An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring," the Bank of Greece said.

Tsipras began a visit to Russia on Thursday to hold talks with the country's President Vladimir Putin. The ITAR-TASS news agency reported Russia's Deputy Prime Minister Arkady Dvorkovich as saying that Russia is ready to consider providing financial assistance to Greece.

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