Greek shares stumble after IMF pulls out of bailout talks

ATHENS, Greece - Stark warnings to Greece and the unexpected decision by the International Monetary Fund to walk away from bailout talks weighed on Greek shares Friday, a day after hopes of an impending deal triggered widespread buying.

The main Athens stock exchange was trading 2.8 percent lower in midday trading. Despite the decline, the index has a long way to claw back the 8 percent surge on Thursday.

Friday's drop follows the IMF's move to pull its negotiators out of the talks in Brussels and send them back to Washington D.C., saying there had been no progress and that major differences remained in key issues.

The move contrasted with recent optimism expressed by the Greek side that some sort of deal will be cobbled together by the end of the month. Greece's 240 billion-euro ($270 billion) bailout expires June 30, at which point the country will lose access to the rescue loans it desperately needs to repay debts and avoid a default that could force it out of the euro.

The news also weighed on European markets, with most indexes in the region down. Germany's DAX, for example, was 0.8 percent lower. The euro was faring worse, trading 0.6 percent lower at $1.1182.

"The IMF unexpectedly blew a giant hole in the recent optimism," said Michael Hewson, chief market analyst at CMC Markets.

It looks increasingly like next week's meeting of eurozone finance ministers in Luxembourg could prove decisive in sealing Greece's financial fate. According to European Union President Donald Tusk, the June 18 meeting "is really crucial and should be decisive."

Even though the IMF pulled out of the talks, discussions are set to continue at least with European officials over coming days.

German Chancellor Angela Merkel said Friday's it's important to continue with the talks. "Where there's a will, there's a way, but the will must come from everybody," she said in a speech in Berlin.

And Jeroen Dijsselbloem, the eurozone's top official, also said the Greek government has to come up with "sound" proposals on certain aspects of its bailout package.

"The eurogroup is scheduled for the 18th and whether we can discuss a concept agreement then or not, the meeting will go ahead and I think it is in the Greeks' interest to get that agreement," Dijsselbloem said in The Hague.

Dijsselbloem also sought to douse talk that the IMF had walked away from the talks. "The teams fly backwards and forwards," he said. "They are still ready and prepared to talk with the Greeks."

However, Dijsselbloem said he can't foresee a deal if the IMF is not involved.

With the pressure on Greece mounting as time runs out, a poll in Germany found increasing acceptance of a possible Greek exit from the euro.

A poll published by Germany's ZDF television Friday showed 41 percent of respondents in favor of Greece staying in the eurozone and 51 percent against. That's a marked shift from the beginning of the year, when 55 percent of Germans favored keeping Greece in the euro and 33 percent were against.

The new poll found that 24 percent favor further EU concessions to Greece, while 70 percent say the EU should give no further ground.

The poll of 1,230, conducted by the Forschungsgruppe Wahlen institute, gave a margin of error of plus or minus 3 percentage points.

Greece's creditors -- its fellow eurozone states and the IMF -- want the country to commit to new economic reforms before they disburse the last 7.2 billion euros ($8.2 billion) left in Greece's bailout fund.

The final installment has been pending since last year and with no access to the international borrowing market, Greece has been struggling to pay both its international debts when they fall due, and to continue paying salaries and pensions.

Without outside help, it is unlikely Athens will be able to repay a roughly 1.6 billion-euro debt installment due to the IMF on June 30 and larger debts due to the European Central Bank in July and August.

"We are coming to a head, and that the situation will change fundamentally in the coming couple of weeks," said David Mackie of JPMorgan.

"Our judgment remains that Greece will offer concessions to get a deal. The Greek position deteriorates dramatically beyond the end of June, as capital controls would likely make the political and economic situation in Greece even more difficult than it is now."