Greece was locked Monday in intense talks with its EU partners after the country's prime minister stuck to his anti-austerity guns with the deadline for a deal needed to avoid the risk of default and a euro exit just days away.
In a rousing policy speech to parliament, Prime Minister Alexis Tsipras on Sunday swore he would be "unshakeable" in implementing his electoral promises and refused to apply for an extension to the much-loathed 240-billion-euro ($270 billion) bailout.
The European Commission's representative for the EU-IMF-ECB troika and head of the Euro Working Group were in Athens for talks with the finance ministry in a bid to thrash out a last-minute deal ahead of the emergency meeting of eurozone finance ministers on Wednesday.
Athens is expected to push for a new debt deal with its international creditors, so far something which its EU parterns have resisted, and its determination to rip up the 2010 reforms-for-loans programme has sparked fears the country could default and exit the eurozone.
"With very little time to spare, Tsipras let an opportunity pass to reassure Greeks, the European partners and markets that his government will do what it takes to keep Greece in the euro," Berenberg's Christian Schultz said.
The Greek stock exchange plunged over 5.0 percent on Monday reflecting investor unease after Tsipras's speech, which pledged to implement a series of social and economic reforms outlawed under the bailout deal.
Stocks were down across Europe as alarm bells rang across the financial sector, with Berenberg tweeting "Greece on collision course ahead of EU meetings. 35% Grexit chance."
ING Credit Strategy said that it was "difficult to see how Europe can avoid fallout from the weekend speech by Alexis Tsipras," adding, however, that while "the clock is indeed ticking for some interim solution... whether Eurogroup will cave this week is questionable."
French Finance Minister Michel Sapin summed up the dilemma for his EU colleagues on his arrival at a G20 meeting in Istanbul, saying that there needed to be a way to ensure Greece would not be "at the mercy of any sort of panic situation on the markets."
However, "we cannot simply say, we'll finance, we'll finance" Athens without "respect for European rules" in exchange, he added.
Greece's Finance Minister Yanis Varoufakis was expected to hold a press conference in Athens at 1300 GMT.
- 'Castle of cards' -
He had earlier warned of the damage a Greek exit could inflict on the zone, telling Italian state television that Athens's departure would spark a domino effect which would lead to the collapse of the bloc.
"Greece's exit from the euro is not something that is part of our plans, simply because we believe it is like building a house of cards. If you take out the Greek card, the others will collapse," Varoufakis said in an interview with Italian public broadcaster RAI that was aired on Sunday.
Varoufakis also warned Europe that Italy -- a potential ally in the battle against austerity -- was not safe from financial trouble despite its promises to tow the line on reforms dictated by Brussels -- and that the country also had an unsustainable debt.
That sparked an immediate response on Twitter from Italy's Economy Minister Pier Carlo Padoan who said the country's debt was "manageable".
Tsipras was continuing the diplomatic blitz of European capitals which took him to Rome and Paris last week, meeting Austrian Chancellor Werner Faymann in Vienna on Monday.
He will hold his first face-to-face talks with German Chancellor Angela Merkel at an EU summit on Thursday.
So far Greece's demands for more time to renegotiate the country's massive 240-billion-euro EU-IMF rescue deal have hit a wall, with European paymaster Berlin vehemently opposed.
The European portion of the bailout is due to expire at the end of the month, putting Athens under pressure to do a quick deal.
The government has appealed for temporary funding from its EU partners to tide it over while continuing the negotiations.
A meeting of eurozone finance ministers next Monday is seen as the last chance for Greece to back down and request an extension to the current bailout or reach a deal interim financing if the new arrangement is to be in place when the current bailout expires at the end of the month.