Crunch time for Greece, as debt payment looms
Greece faces a potentially make-or-break meeting on Monday, when European leaders will meet to discuss extending a bailout. Failure to hash out an agreement would leave the cash-strapped country days away from defaulting on its debt, which could force it to leave the eurozone.
The crisis has been a long time coming. Greece has been kept afloat for five years by its neighbors in Europe and the International Monetary Fund (IMF) through a 245 billion euro ($279 billion) rescue package that will run out on June 30. Greece also likely would miss a $1.54 billion payment to the IMF due on the same day without an aid transfer.
Greek Prime Minister Alexis Tsipras tried to put a positive spin on the situation, noting in a statement that "those who invest in crisis and horror scenarios will be proven wrong."
The European Central Bank (ECB) provided emergency liquidity to Greek banks that will allow them to operate through Monday. Heather Conley, director of the Europe Program at the Center for Strategic and International Studies, told CBS MoneyWatch that type of assistance is usually provided on a weekly basis.
She is worried that a Greek default might trigger an economic meltdown. "They really have simply run out of time. Monday really is going to be a day to see whether anything can be salvaged or we're going to see other events happen."
Pensions are among the issues dividing Greece and its creditors. According to American University professor Stephen Silvia, Greeks can retire at 50, and many are eligible for full retirement benefits at 52. Such benefits are far more generous than in other parts of Europe.
"If they don't give on that, I don't see much room for a settlement and I think Greece will default," he said. "The question is, can Tsipras make that concession, and if he does can he get his party to go along with it?"
The Greek economy is deeply troubled, in part from the deep cuts to government spending and tax hikes imposed by international lenders following the financial crisis. After emerging from a six-year long recession last year, Greece slid back into recession in the first three months of the year, and its economy is at risk of shrinking further in the second quarter, according to research firm IHS.
Meanwhile, tax evasion is rampant. According to Greece's Ministry of Finance, tax revenue was one-quarter below target in May. Unemployment tops 25 percent and average income plunged 40 percent over the past five years.
Even so, creditors are expected to offer Greece a "take it or leave it offer" if it wants additional assistance, according to IHS.
"It really does seem that if the Greek government does not accept the proposals of the [EU, ECB and IMF], then default becomes a reality," Spyros Economides, an associate professor of international relations at the London School of Economics and Political Science, said in an email. "Either way, if any agreement is reached on Monday it will only be a temporary one covering the next few months."