Greece: Grexit would be a 'modern Greek tragedy' if aid talks fail

The Central Bank of Greece issued a stark warning of a Grexit on Wednesday (17 June) if aid talks fail ahead of an end of June repayment deadline.

In its latest report, the central bank warned that the country would be put on a "painful course" towards default and exiting the eurozone if the government and its international creditors failed to reach agreement on an aid-for-reforms deal.

The ongoing crisis has prompted an outflow of deposits of about €30bn (£21.47bn, $33.84bn) from Greek lenders between October and April, the central bank said.

It urged the European Union to spell out promises of debt relief to Greece - a key demand from Athens - in greater detail.

Greece is set to default on a €1.6bn debt repayment to the IMF on 30 June unless it receives fresh funds by then, possibly driving it towards an exit of the eurozone.

The bloc has no legal basis for forcing a country out, but Athens might end up with a de facto parallel currency, paving the way for a more formal exit from the euro.

The President of the Athens Chamber of Commerce Constantinos Michalos urged all sides to adopt a calmer, more sensible tone, saying the stakes were too high for this level of brinkmanship.

"Greece is at an extremely critical stage at the moment, we are looking for a mutually beneficial agreement with our partners and lenders. However if there is a rift, then it could be catastrophic for the Greek economy and it would be a modern Greek tragedy in the making."

"So what we are hoping for is that sense will prevail for the next few days so that we do find this mutually beneficial agreement. Our partners need to understand that a different mixture of economic policy needs to be implemented within the Greek economy so that there is enough space in order to enhance growth which is the only way out of this particular crisis," he said.

Financial markets, for months indifferent to wrangling over releasing billions of euros of aid for Greece, reacted with mounting alarm.

European stock markets hit their lowest level since February and the risk premium on bonds of other vulnerable eurozone states leapt in one of the sharpest episodes of contagion since the height of Europe's debt crisis in 2012.