Debt-laden Greece headed into a second week of political paralysis Monday after emergency talks between party leaders failed to forge a unity cabinet and avert new elections, amid growing EU concern.

Discussions under 82-year-old President Carolos Papoulias will resume at 1630 GMT but chances of a breakthrough appear slim, with none of the protagonists looking likely to back down to break the deadlock.

"The president told me that sadly, until this point there has been no potential to form a unity government," said Fotis Kouvelis, whose small Democratic Left party was seen as the most likely candidate for a coalition government alongside the mainstream conservative and socialist parties.

As it struggles to form a cabinet, Greece faces mounting threats of a loan freeze should it falter on promised structural reforms.

If a cabinet cannot be formed by Thursday, when parliament convenes, new elections will have to be called in June, a prospect many in the eurozone view with dread.

Opinion polls show that the radical leftist Syriza party, which soared to second place in the May 6 election on an anti-austerity ticket, rejecting Greece's EU-IMF bailout deal, would handily win a repeat ballot.

Faced with deep recession after two years of austerity, even the conservative and socialists who were previously in a cost-cutting coalition are now talking about renegotiating the terms of Greece's multi-billion euro (dollar) loan agreement to boost growth.

It is their only hope to secure the backing of Democratic Left, without whom they cannot form a viable government.

In return for its help, Democratic Left wants to "immediately" cancel legislation that slashed the minimum wage and facilitated layoffs, and start to "disengage" Greece from the unpopular EU-IMF rescue package.

Such language is anathema to Greece's creditors.

On Saturday, German central bank governor Jens Weidmann said: "If Athens doesn't keep its word, it will be a democratic choice.

"The consequence will be that the basis for fresh aid will disappear."

The crisis has raised the spectre of Greece defaulting and even leaving the 17-member eurozone.

Greece's plight will be high on the agenda when eurozone finance ministers meet in Brussels on Monday.

Governments have already issued Athens with a clear warning, last week withholding some monies already supposedly signed off for the immediate post-election period.

European Commission head Jose Manuel Barroso made it plain, warning that broken promises render agreements void and raising the prospect of Greece exiting the euro club.

Germany has echoed these noises, which represent something of a last throw of the dice for the EU and the eurozone as it stands after two years of "will they, won't they" drama.

International creditors have warned that no new payments under the latest EU-IMF 130-billion euro ($168-billion) bailout will be made if Greece fails to deliver structural reforms required to put the economy back on track after decades of overspending by the state.

On Sunday, some of the leaders said Papoulias produced a letter from outgoing prime minister Lucas Papademos on the state of the Greek economy. He has however declined to divulge the contents of the letter publicly.

According to local media, the state only has enough cash to pay salaries and pensions until late June.

The Greek Communist party, which says new elections are almost certain, will hold a rally in central Athens on Monday evening.

Meanwhile, Democratic Left, which faces strong pressure from Syriza to reject a political deal, is convening its political committee at 1100 GMT on Monday.

In November, Greek political leaders needed four days of back-breaking debate before settling on former European Central Bank deputy chief Lucas Papademos as caretaker prime minister to help broker a deal that slashed Greece's near and mid-term debt of over 350 billion euros by nearly a third.

On Friday, Brussels revised downwards its economic forecasts for Greece.

The European Commission said the Greek economy, now in its fifth year of recession, could contract by another 4.7 percent this year and see zero growth in 2013.

The credit rating agency Fitch warned that the emergence of a Greek government "unwilling or unable to abide by the terms of the current EU-IMF programme would increase the risk of Greece leaving the eurozone."

Greece has committed to finding another 11.5 billion euros in savings over the next two years. It also needs to reimburse 435 million euros in maturing debt on May 15.