WASHINGTON/BRUSSELS (Reuters) - The International Monetary Fund dramatically raised the stakes in Greece's stalled debt talks on Thursday, announcing that its delegation had left negotiations in Brussels and flown home because of major differences with Athens.
The surprise IMF move came as the European Union told Greek Prime Minister Alexis Tsipras to stop gambling with his cash-strapped country's future and take the crucial decisions needed to avert a devastating default.
A Greek source told Reuters that the entire Greek delegation that had been negotiating a cash-for-reform deal had also left for home on Thursday, citing continuing disagreements.
"There are major differences between us in most key areas," IMF spokesman Gerry Rice said in Washington. "There has been no progress in narrowing these differences recently and thus we are well away from an agreement."
Greece needs a deal to unlock aid before the end of the month when it is otherwise set to default on a 1.6 billion euro ($1.8 billion) repayment to the Washington-based IMF.
That could trigger capital controls and possibly push Greece out of the euro zone, with unpredictable consequences for financial markets and the European economy.
Rice said the sticking points remained pensions, taxes and financing. The IMF technical team had returned to the United States but remained "fully engaged" with Athens.
European stocks fell after the IMF comments.
Athens stood by its assertions of recent days that all is not lost. "The Greek delegation, as agreed, is ready to intensify deliberations in order to conclude a deal soon, even in the coming days," spokesman Gabriel Sakellaridis said.
One official close to the negotiations also cautioned against excessive pessimism, saying the IMF team's departure represented a break in the talks rather than a breaking off.
IMF experts sit in the "Brussels Group" of technical officials which has been on the sidelines in recent days as the politicians bargained. This suggested there was little point in their staying in Brussels, although they appeared ready to return at short notice if need be.
However, European Council President Donald Tusk delivered an unprecedentedly forthright message to Greece's radical anti-austerity government after four months of bitter negotiations.
"There is no more time for gambling. The day is coming, I'm afraid, that someone says that the game is over," he told a news conference after chairing an EU-Latin America summit that was dominated by intense talks with Tsipras on the sidelines.
"It is very obvious that we need decisions, not negotiations," Tusk said, adding that Athens needed to be "more realistic".
Tsipras held two hours of talks with European Commission President Jean-Claude Juncker, but neither side reported any breakthrough. "Come in the torture room," Juncker told Tsipras at the start of their meeting.
EU officials later described the talks as a "last attempt" to reach a debt deal.
Asked about concerns for the process raised by the departure of IMF and Greek negotiators, an EU diplomat said: "If the process was working properly the president would not have had to have a meeting with Tsipras today."
Tsipras told reporters he had worked on bridging the remaining differences on fiscal and financing issues. "We are working to assure an agreement which will ensure that Greece will recover with social cohesion and viable public debts," he said.
Tusk's admonition reinforced warnings by German Bundesbank President Jens Weidmann and EU Economics Commissioner Pierre Moscovici that time was running out to avert a Greek state bankruptcy and possible exit from the euro zone.
Late-night talks between Tsipras and the leaders of Germany and France produced no breakthrough, although all sides said they had moved closer on the procedure leading to an agreement.
"At the end of the talks there was absolute unanimity that Greece will work intensively and full steam ahead ... in the coming days to solve all remaining issues," German Chancellor Angela Merkel said.
To clinch a deal, EU officials said Tsipras's government needed to offer alternative savings and tax measures to replace proposed pension cuts and tax rises he rejected as antisocial, to deliver a modest fiscal surplus before interest payments.
People familiar with the talks said the two sides have come closer to agreeing a primary surplus target but are still wide apart on how to achieve it, with EU and IMF experts doubting that measures touted by Greece can do the job.
Late on Thursday German newspaper Bild reported that the German government is holding "concrete consultations" on what to do in the case of a bankruptcy of the Greek state, citing several people familiar with the matter.
This includes discussions about introducing capital controls in Greece if the crisis-stricken country goes bankrupt, Bild said in an advance copy of an article due to be published on Friday. A spokesman for the German government could not immediately comment on the report.
More dire warnings rained down on the Greek leader as he contemplated what concessions to make to clinch a deal without alienating his left-wing supporters who elected him in January on promises to put an end to years of austerity.
"There is a strong determination to help Greece," Weidmann said in a speech in London. "But time is running out, and the risk of insolvency is increasing by the day."
The main losers of a Greek default and euro exit would be Greece and the Greek people, he said.
The Greek leader faces pressure both from left-wing hardliners and from voters, most of whom say they want to remain in the euro zone and want him to make concessions for a deal.
Underlining the resistance Tsipras faces if he gives too much ground, hundreds of supporters of the Communist-affiliated trade union PAME flooded on to an Athens square in a peaceful anti-bailout protest on Thursday evening.
Earlier they replaced the EU flag with PAME's on the roof of the finance ministry. They also draped a banner across five storeys of the ministry showing two previous prime ministers who each negotiated a deal with the lenders. Next to them was a portrait of Tsipras above the slogan "Bailout Number Three".
($1 = 0.8902 euros)
Additional reporting by Robin Emmott, Alastair Macdonald and Jan Strupczewski in Brussels, Angeliki Koutantou and Karolina Tagaris in Athens; Writing by Paul Taylor and David Stamp; Editing by Crispian Balmer and Giles Elgood