Greek Prime Minister Alexis Tsipras. Photo: Reuters

As a potential Greek default looms, Finance Minister Edward Scicluna has expressed frustration at the Greeks’ negotiating tactics, saying there seemed to be no limit to their demands.

“If Greece turns down on an upcoming package hammered out by EU leaders then there would be no turning back,” Prof. Scicluna warned ahead of a crucial EU summit tomorrow.

EU President Donald Tusk called a summit of the leaders of the 19 eurozone countries tomorrow in Brussels after finance ministers failed on Thursday to break the five-month-old deadlock between the anti-austerity government in Athens and its EU-IMF creditors.

Greece has until the end of June to agree a reform deal to secure the remaining portion of its multi-billion-euro bailout, which it needs to avoid defaulting on an IMF debt payment of around €1.5 billion. Greece’s far-left government wants looser conditions for bailout money, but its demands have been deemed unreasonable by the troika, prompting fears it could pull out of the eurozone.

“Nobody wants it that way because it will be very messy and the political fallout is huge. In reality everyone’s afraid but there’s certainly no way this issue could be resolved by the end of June, even if the Greeks agree to the terms and conditions,” Prof. Scicluna said.

If Greece defaulted and left the euro, about €177 million of Maltese money would be at risk. Malta gave Greece a loan of €50 million as well as €127 million to the European Financial Stability Facility, a financial instrument created in the wake of the first bailout programme.

It could be very messy and the political fallout is huge- Prof. Edward Scicluna

“We’ve all borrowed money to lend it to Greece, and we’re losing money on the interest rate,” Prof. Scicluna told The Sunday Times of Malta.

He emphasised concern after panicking savers in Greece withdrew over €3 billion in deposits from the country’s banks in three days last week. The run on banks comes as ordinary people, businesses and investors lose confidence in economy and move to get their cash amid fears national institutions will go bust.

Meetings are still going on behind the scenes ahead of tomorrow’s emergency summit. Meanwhile, speaking at a meeting of the Economic and Financial Affairs in Luxembourg, Prof. Scicluna welcomed the European Council’s decision to lift excessive deficit procedure against Malta.

“We promised that we would do it. It was not easy to accomplish, but we are pleased we have managed.”

What could happen?

• The European Central Bank will need to decide whether to continue authorising emergency lending to Greek banks or to pull the plug altogether.

• If the ECB decides to cut off lending and the country runs out of money, Greece would likely be forced to abandon the euro and print its own currency.

• Greece could also leave the EU, though this is unlikely. Under current EU treaties, there’s no process for kicking a country out of the union and the majority of Greeks want to stay.

• Greek businesses would face a legal and financial disaster. Nervous depositors in other struggling eurozone countries, such as Spain or Italy, may also move their money.