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Greece and the European Union are fast approaching a moment of truth. Greece needs help to make a big loan payment at the end of the month, but is balking at the economic reforms demanded by its EU creditors. Leaders from all sides will gather in Brussels tomorrow to try to negotiate a solution, but a threat of a run on Greece's banks is complicating things. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: So many times before, Greece and its European creditors have come close to the brink, only to work out a last-minute resolution. But it's never been as hard to see a way out of the stalemate as it is now. Jacob Kirkegaard is a senior fellow at the Peterson Institute for International Economics.
JACOB KIRKEGAARD: This is the last chance saloon, if you like, for this weak government and whether or not it wishes to avoid running into arrears, which is a kind word for saying defaulting.
ZARROLI: Greece needs $1.8 billion to pay off a loan from the International Monetary Fund later this month. European officials are willing to help it roll over the debt, but only if Athens agrees to more painful tax increases and spending cuts. And that's something Greece has leftist government refuses to do. As the talks drag on, the rhetoric on both sides has grown harsher. Here was French President Francois Hollande speaking this weekend.
(SOUNDBITE OF PRESS CONFERENCE)
FRANCOIS HOLLANDE: (Through interpreter) Greece has to take measures. If Greece respects the path, it will have all the money it needs. I'm not optimistic or pessimistic. We're in a crucial moment, and every moment counts.
ZARROLI: Over the weekend, Athens made a new package of proposed reforms it hopes will unlock the funds it needs. But Eswar Prasad, professor of international economics at Cornell University, says there's not much trust left between the two sides.
ESWAR PRASAD: Both sides have hunkered down into their hard-line positions, and it's going to be very difficult to reach a compromise at this stage.
ZARROLI: With this latest deadline approaching, Greek citizens have been pulling money out of their banks at a faster and faster pace. They're worried that without aid from Europe, the banks will run out of money, and Greece will be forced to place tough new restrictions on cash withdrawals. Economist Simon Johnson of MIT says that's what happened during the Cyprus bank crisis in 2013.
SIMON JOHNSON: Even when Cyprus remained in the euro area, restrictions were put on euro denominated deposits in Cyprus. So people are not being silly by worrying about the risks.
ZARROLI: There's even been speculation that Greece could be forced to declare a bank holiday on Tuesday if there's no agreement tomorrow night and prevent its banks from opening altogether. The Peterson Institute's Jacob Kirkegaard says Greek citizens would be unable to access their own money, but the impact would be even greater than that.
KIRKEGAARD: There'll be a lot of businesses that also have their working capital in the banks, that use the banks to pay wages that pay suppliers and others. They won't be able to pay wages. Other workers won't be paid. It's really the beginning of a very rapid and very dramatic deterioration of the economy.
ZARROLI: No one wants to see that happen, but the antipathy between European leaders and Greece has reached something of a high watermark. Even as the two sides prepare for their meeting tomorrow, there's plenty of skepticism that they can resolve the impasse. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.