Greece rebuffs EU 'ultimatum' over bailout, but vows 'honorable solution'

“Cautious optimism” over the prospect of a Greek bailout deal was offset Tuesday by veiled threats by EU finance ministers and defiance from Athens over what it described as “blackmail” and “ultimatums” from its eurozone creditors.

Negotiations broke down Monday night amid acrimony over what Greek officials said was an “unacceptable” draft agreement under which its economy would be tethered to the bailout provisions for six more months. The Greek government has declined to apply for an extension to an international funding program, stating that it imposes painful austerity conditions that have wrecked its economy. But with no deal in place, Athens’ credit lines would expire in 10 days time — a move that could nudge it towards becoming the first country to exit the eurozone.

EU finance ministers have insisted that an extension must be adhered to and that a write-off of Greek debt would not be tolerated. They set a Friday deadline for a deal to be struck.

Jeroen Dijsselbloem, Dutch finance minister and chair of the Eurogroup of 19 common currency countries, said Tuesday that the ball was now in Athens’ court.

“It’s really up to the Greeks. We cannot make them or ask them. We stand ready to work with them, also [over] the next couple of days.”

Austrian finance minister Hans Joerg Schelling said: “The Greek government must shift its position,” adding: “Time is pressing.”

Meanwhile his U.K. counterpart George Osborne warned that it was “crunch time” for Athens and that failure to reach a deal would be “very severe for economic and financial stability."

Greek government officials were dismissive of efforts to coerce Athens into a deal. Deputy foreign minister Nikolaus Chountis said: “We don’t accept blackmail proposals, ultimatums about extending the bailout.”

Nonetheless he voiced “cautious optimism” over the talks. And Greek Finance Minister Yanis Varoufakis pledged an “honorable solution” to the impasse.

“We will continue to deliberate, in order to enhance the chances and actually achieve a very good outcome for the average European,” he said.

But concern over the distance between Greece and other eurozone countries translated into market jitters.

Greek stocks and bonds were down on news of Monday’s failed talks. And risks of Grexit — a Greek exit from the eurozone — now stands at 40 percent, according to analysis from the Economist Intelligence Unit.

Greece's left-leaning Syriza government made scrapping the bailout program a cornerstone of its recent triumphant election campaign, and has since vowed to stick by its promise to voters. It follows widespread unpopularity of the bailout, under which $275 billion of rescue money was plowed into the Greek economy but with strings that included painful austerity measures.

Syriza, in power for barely three weeks, blames those measures for the country's economic ills — the Greek economy has shrunk by around a quarter since 2008, despite a recent modest return to growth. Meanwhile, unemployment and poverty have swelled.

Al Jazeera and wire services