The United States piled pressure on Greece Friday to agree to key reforms to obtain new EU financing, but equity markets sank in fear that Athens is headed for default.
Stepping into the latest European financial crisis, both President Barack Obama and Treasury Secretary Jacob Lew said Greece needs to reach a deal that will get it $7.2 billion euros ($7.8 billion) more in bailout financing from the European Union.
Lew warned in discussions with Eurogroup President and Netherlands Finance Minister Jeroen Dijsselbloem that no agreement between the two sides "would create immediate hardship for Greece, and uncertainties for Europe and the global economy more broadly," the Treasury said.
Lew told Dijsselbloem that "Time is of the essence for Greece to agree to a comprehensive set of reforms," the Treasury said.
Obama more directly called on Athens to accept the requirements that EU negotiators insist upon before releasing any more funds from the massive financial rescue program.
"Greece needs to initiate reforms," Obama said at a joint press conference with Italian Prime Minister Matteo Renzi at the White House.
"They have to collect taxes. They have to reduce their bureaucracy, (institute) more flexible labor practices," he said.
The comments came as the Greek debt drama drew heavy attention during the high-powered spring meetings of the International Monetary Fund and World Bank in Washington.
Greece is under pressure to reach a tentative deal with its creditors by the April 24 meeting in Riga, Latvia of the Eurogroup, the EU finance ministers.
But the country needs the added financing in place by early May when it has to make a huge debt repayment to the IMF, and after that to the European Central Bank.
If it cannot come up with the funds, fears are that a default could force it to quit the euro area, an unprecedented move that could spark more turmoil in financial markets.
Greek negotiators are to meet Saturday in Brussels with representatives of the European Union, the European Central Bank and the IMF to continue talks.
But the downturn in US and European equity markets on Friday show investors are deeply worried that a deal won't be struck.
In New York, the S&P 500 index lost 1.1 percent, and in Europe Germany's Dax 30 fell 2.6 percent and the CAC 40 in Paris lose 1.6 percent.
"Another day brings another story about Greece, and once again the inability of the Greek finance minister to employ a light touch has spooked markets," said IG analyst Alastair McCaig.
"Bond markets, normally immune to the volatility that equities frequent, have seen Greek yields skyrocket as the chances of them defaulting grow ever more likely."
Greece's leftist government has balked at implementing what it sees as more growth-sapping austerity policies, and so far has been unable to find a compromise with its EU-IMF creditors.
Speaking in Washington on Thursday, Greek Finance Minister Yanis Varoufakis said the country was committed to staying in the eurozone. But, he added, they would not accept more austerity conditions.
"We've tried that medicine but it hasn't worked," he said.
"We will compromise, we will compromise and we will compromise in order to come to a speedy agreement, but we are not going to be compromised."
While others, including Economic Affairs Commissioner Pierre Moscovici, voiced confidence that a deal keeping Greece in the single-currency area would be reached, German Finance Minister Wolfgang Schaueble expressed doubts that an agreement was close.
"There is nothing new. And I'm not sure that there will be anything new in Riga next week," he told journalists in Washington.