Talks between Greece and euro zone finance ministers over the country's debt crisis broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout package as "unacceptable".
The unexpectedly rapid collapse raised doubts about Greece's future in the single currency area after a new leftist-led government vowed to scrap the 240 billion euro ($272.4 billion) bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.
Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said Athens had until Friday to request an extension, otherwise the bailout would expire at the end of the month. The Greek state and its banks would then face a looming cash crunch.
How long Greece can keep itself afloat without foreign support is uncertain. The euro fell against the dollar after the talks broke up but with Wall Street closed for a holiday, the full force of any market reaction may only be felt on Tuesday.
The European Central Bank will decide on Wednesday whether to maintain emergency lending to Greek banks that are bleeding deposits at an estimated rate of 2 billion euros ($2.27 billion) a week. The state faces some heavy loan repayments in March.
Seemingly determined not to be browbeaten by a chorus of EU ministers intoning that he needed to swallow Greek pride and come back to ask for the extension, Finance Minister Yanis Varoufakis, a left-wing academic economist, voiced confidence that a deal on different terms was within reach within days.
"I have no doubt that, within the next 48 hours Europe, is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary," Varoufakis told a news conference, warning that the language of ultimatum never worked in Europe.
He cited what he called a "splendid" proposal from the European Commission by which Greece would get four to six months credit in return for a freeze on its anti-austerity policies. He said he had been ready to sign that - but that Dijsselbloem had then presented a different, and "highly problematic", deal.
A draft of what Dijsselbloem proposed, swiftly leaked by furious Greek officials, spoke of Athens extending and abiding by its "current programme" - anathema to a government which, as Varoufakis said, was elected last month to scrap the package.
"More logic, less ideology"
Commission officials denied offering a separate plan and the man Varoufakis said presented it, Economics Commissioner Pierre Moscovici, stuck to the same script as Dijsselbloem.
Greece must extend its bailout on the current conditions, he said, even if that could be couched in language that did not embarrass Prime Minister Alexis Tsipras before his supporters.
"We need more logic and less ideology," Moscovici said as EU officials fretted about how seriously the novice Greek leaders were taking their finances and how far concerns about semantics and saving political face might trump pressing economic needs.
Dijsselbloem, who insisted he was willing to be flexible on terminology that has become highly charged for Greek voters, said further talks would depend on Greece requesting a bailout. Varoufakis and the other ministers will remain in Brussels on Tuesday for a routine meeting on the EU economy.
"The general feeling in the Eurogroup is still that the best way forward would be for the Greek authorities to seek an extension of the program," Dijsselbloem told a news briefing.