By Paul Carrel and Angeliki Koutantou
BERLIN/ATHENS (Reuters) - German Chancellor Angela Merkel said on Thursday a deal between Greece and its creditors was still possible if Athens showed the necessary will, amid mounting pessimism that the austerity-hit country might crash out of the euro zone.
Neither side has shown any sign of yielding, with creditors insisting it is up to Greece to make concessions to secure a cash-for-reforms deal so the government can honour looming debt repayments and avoid a potentially disastrous default.
Far from giving ground, Greek Prime Minister Alexis Tsipras launched a new attack on the lenders in an article in a German newspaper, slamming what he called their "blind insistence" on pension cuts he said would worsen his country's crisis.
The leftist leader began a two-day visit to Russia to attend an economic forum in St. Petersburg as euro zone finance ministers gathered in Luxembourg to discuss the impasse. Given that Athens ruled out bringing new proposals to the discussion, hopes for a breakthrough at the meeting have all but vanished.
Arriving for the Luxembourg meeting, EU Economics Commissioner Pierre Moscovici told reporters he didn't want the debt standoff to turn into a rerun of the Battle of Waterloo on the 200th anniversary of the historic defeat for France.
"Today is an important date and I have no desire to see us return to the age of Waterloo when the Europeans were all lined up against a single state," he said.
With European leaders and Greece's central bank warning a possible "Grexit" was on the horizon, European shares fell and Greek shares hit a new three-year-low.
In a sign of growing nervousness among many Greeks about their country's fate, pro-euro demonstrators will hold a rally in central Athens, calling for an end to the deadlock. That comes a day after anti-austerity protesters rallied in support of the government and against policies set by lenders.
"I'm still convinced: where there's a will, there's a way," Merkel told German lawmakers, repeating a message from last week. "If those in charge in Greece can muster the will, an agreement ... is still possible."
Merkel faces growing opposition from within her ruling conservatives to granting Greece any more bailout money, with a narrow majority of Germans now in favour of Greece leaving the euro zone.
Having been voted into power in January on a pledge to roll back austerity, Tsipras's leftist government has balked at demands for new pension cuts and tax hikes on basic goods like food and electricity.
PRO-EURO RALLY
Athens needs to break the impasse by the end of the month, when it faces a 1.6 billion euro ($1.8 billion) repayment due to the International Monetary Fund that could force it to default.
Greeks have been squeezed by five years of budget cuts demanded by the European Commission, the International Monetary Fund and the European Central Bank in two bailouts. But opinion polls suggest the majority want to stay in the euro.
"Greece belongs to Europe!" read one Facebook invitation to join Thursday's pro-euro rally, which had received more than 11,000 "likes" by Thursday morning.
"We are sending a strong message to the government," it said. "It's time we join our voices in favour of our country staying in the euro and in the European family."
Those calls were echoed in an open letter by a group of Greek businesses -- including tourism operators and retailers -- to Tsipras, urging him to close a deal.
"Greece's relations with our partners have been hit hard and both sides are responsible for that," the letter said. "But the most important thing is to not sacrifice a great national achievement which is Greece's euro zone membership and to put an end to this "balance of terror" which has frozen the economy and undermines any growth prospect," they said.
Tsipras is expected to meet business leaders in St. Petersburg ahead of talks with Russian President Vladimir Putin on Friday.
In a guest column for Der Tagesspiegel newspaper in Berlin, Tsipras sought to dispel a "myth" that German taxpayers were paying Greek pensions and wages.
"The blind insistence of cuts (in pensions) in a country with a 25 percent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation," he said.
(Additional reporting by Ingrid Melander in Luxembourg; Writing by Matthias Williams; Editing by Crispian Balmer)
