Financial markets sold off aggressively yesterday as investors woke up to the risk that the long-running Greek debt talks may end in failure.
In Athens, Prime Minister Alexis Tsipras said disagreements between European institutions and the International Monetary Fund (IMF) were to blame for an impasse in negotiations.
His Syriza-led left wing government is sticking to a hard line that has brought Greece to the brink of default.
Financial markets, long undisturbed by the rumbling Greek debt negotiations, are now reacted with mounting alarm, with European stock markets hitting their lowest level since February.
Yields on bonds issued by other so-called "peripheral" Eurozone members rose in one of the most aggressive episodes of contagion since the height of Europe's debt crisis in 2012.
Market moves yesterday mean it would now cost the Irish government 1.733pc a year in interest to borrow for 10 years, that is almost three times the 0.641pc it would have cost in April.
European shares hit a near four-month low, with major euro area indices including Germany's DAX, pictured below, France's CAC and stock markets in Italy and Spain all weaker. The Iseq index of Irish shares was down slightly.
Greece is on the brink of defaulting on a €1.6bn debt repayment due to be made to the IMF on June 30.
The country will not have cash for the payment unless it receives fresh bailout funds by then.
A default could in turn push Greece towards an exit from the Eurozone. However, even if a default happens the mechanism for leaving the single currency is undefined. Both Athens and international lenders from the European Union, European Central Bank and IMF have dug into entrenched positions with each side blaming the other for the collapse of talks at last weekend.
In a hardline speech Alexis Tsipras accused the IMF of "criminal" resonsibility for the Greek debt situation.
He blamed entrenched difference between the IMF and Europe for the lack of progress in reaching agreement on a sustainable debt plan for his country.
Resistance from European agencies to a writedown of part of Greece's debt was standing in the way of agreement, despite IMF pressure for restructuring, the Greek leader said.
"The situation in which we find ourselves today is that IMF positions prevail when it comes to the strictness of austerity measures asked, while at the same time EU positions prevail when it comes to the denial for any discussion about Greek debt sustainability," Mr Tsipras said.
Finnish Prime Minister Juha Sipila said it would take "a miracle" to reach a solution next week, but said that remains the aim. (Additional reporting Reuters/Bloomberg)