Deal or no deal, Greece still faces bankruptcy

Greece's 'end of the road' is bankruptcy: Economist
Greece's 'end of the road' is bankruptcy: Economist   

Despite hopes that Greece and its lenders will come to some agreement in May, not everyone is convinced that a deal – which could unleash a last tranche of much-needed bailout aid -- can resolve the country's looming debt problem.

Talks over reforms Greece has to make in return for aid continued this weekend after months of wrangling which have led to growing fears that the country could default, or even exit the euro zone – a scenario dubbed a "Grexit."

"I think the end of the road is still bankruptcy for Greece," Steen Jakobsen, chief economist at Saxo Bank, told CNBC Monday. "Whether it becomes a Grexit is a different story but I think they're just playing for time."

:Graffiti covers the shopping windows of closed shops, as a pedestrian walks past, in Athens, Greece.
Kostas Tsironis | Bloomberg | Getty Images
:Graffiti covers the shopping windows of closed shops, as a pedestrian walks past, in Athens, Greece.

He added that the Greek problem likely had two solutions.

"(Firstly) by defaulting, which I think will happen in the bankruptcy case. Or you can grow yourself out of it," Jakobsen said. "But in no shape or form is Greece willing or able to enact a program that is going to set growth in motion."

The comments come after several days of technical talks between Greece and the so-called Brussels Group, made up of the bodies overseeing Greece's bailout program, the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission.

Talks are to resume Monday, according to Greek government spokesman, Gabriel Sakellaridis. Speaking at a press conference, he added that "significant progress" had been made in talks with lenders and that a broader agreement could be arrived at by the end of May or mid-June.

On Monday, Greece's Labour Minister Panos Skourletis told Mega TV that the country had chosen to meet its debt payments and reach an agreement with its lenders, Reuters reported.

An agreement with lenders on reforms could see Greece receive a vital last tranche of bailout aid worth 7.2 billion euros ($8.03 billion) that it desperately needs to make loan repayments to the IMF and ECB in the next few months.

Euro zone officials close to the talks and Greek officials were not immediately available to comment on the progress of talks when contacted by CNBC.

Lenders 'unyielding'

The next key date for Greece and its lenders is the Eurogroup meeting of euro zone finance ministers on May 11, and Greece's Prime Minister Alexis Tsipas hopes a deal can be reached by then.

But comments by Labour Minister Skourletis reflected the stumbling blocks between Greece and its lenders over reforms. He said the IMF was unyielding on its demands for labour reforms, including pensions cuts, mass layoffs and resisting a plan by the leftist-led government to raise the minimum wage, Reuters reported.

The Greek government, led by the leftist Syriza party, wants to relax austerity measures to ease financial pressure on the public, but its lenders insist that it must cut spending and adhere to austerity measures.

As discussions drag on, time is running out. Greece has a loan repayment of 744 million euros due to the IMF on May 12 and more repayments totaling over a billion euros in June.

Read MoreGreece's tough repayment schedule

Against this backdrop of pressing repayments, Jakobsen said he believed that Greece would still have to default.

"I might not be right this year, but ultimately Greece will have to default because the burden on the economy and corporations in Greece is so large that it's impossible to sustain without deep-rooted reform, which certainly Syriza is not standing for," he said.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld