Eurozone leaders’ Summit was trying to find a solution, while Greek government was left with very few allies.
Greece was facing the dilemma of an uncontrolled default with Grexit – on one hand – and a humiliating surrender – on the other, during Sunday’s emergency meeting of the eurozone’s 19 leaders. The Summit paused just less than an hour from its start and Greek Prime Minister Alexis Tsipras was meeting with French President Francois Hollande and German Chancellor Angela Merkel.
A Greek official gave no further details about the meeting, which also included Donald Tusk, who chairs meetings of European leaders.
Sunday’s summit was dealing exclusively with Greece, which desperately needs a deal with European creditors to stave off immediate financial collapse and the country’s potential exit from the euro.
But any deal looks like it will require the Greek government to impose tough austerity measures.
According to AP, the Greek government appears to have accepted a raft of demands from European creditors that it had previously condemned.
Among a series of proposals that made it into a draft document sent to eurozone leaders, Greece has accepted that officials from the creditor institutions will have some sort of base in Athens.
It remained unclear whether that ability “to work on the ground” will be similar to the hands-on oversight the country underwent after the country’s initial bailout in 2010. Many in Greece hated what they considered foreign meddling in their affairs.
Elsewhere in the eurogroup document obtained by The Associated Press, Greece has agreed to carry out “ambitious” pension and market reforms, and “significantly” scale up its privatization program.
According to the document, the Greek government has agreed to legislate a first set of measures by Wednesday.
At the conclusion of a 4-page draft document of proposals eurozone finance ministers said Greece should be offered “swift negotiations on a time-out from the euro area with possible debt restructuring” if no bailout deal is agreed.
The measure of a potential temporary Greek exit was bracketed in the document, meaning that it was passed to leaders for their consideration.
In the document that shows that Greece has moved a long way to meeting creditors’ demands, the so-called eurogroup said the country may need between 82-86 billion euros ($91-96 billion) in financing.
“The Eurogroup takes note of the possible program financing needs of between EUR 82 and 86bn, as assessed by the institutions,” said the document compiled by eurozone finance ministers.
Eurozone leaders told near-bankrupt Greece at an emergency summit on Sunday that it must restore trust by enacting key reforms before they will open talks on a new financial rescue to keep it in the European currency area.
Greek Prime Minister Alexis Tsipras will be required to push legislation through parliament from Monday to convince his 18 partners in the monetary union to release immediate funds to avert a Greek state bankruptcy and start negotiations on a third bailout programme.
Some laws will have to be passed by Wednesday and the entire package endorsed by parliament before talks can start, one minster said.
Mr Tsipras said on arrival in Brussels he wanted “another honest compromise” to keep Europe united.
“We can reach an agreement tonight if all parties want it,” he said.
Tsipras on Sunday had a phone conversation with US Treasury Secretary Jack Lew. Tsipras told Lew that to have an agreement all sides must want it. Greece has proved that wants it, he said.
An agreement can be sustainable, reiterated Tsipras, when it respects the Greek people and all those that have gone through in the last five years.
But German Chancellor Angela Merkel, whose country is the biggest contributor to Eurozone bailouts, said the conditions were not yet right to start negotiations, sounding cautious in deference to mounting opposition at home to more aid for Greece.
“The most important currency has been lost and that is trust,” she told reporters. “That means that we will have tough discussions and there will be no agreement at any price.”
“It will be a difficult night with tough negotiations, said German Chancellor Angela Merkel on Sunday adding that the Greek economy has got worse in the last period and noted that she is not willing to say yes to whatever agreement at all costs. The advantages should be more than the disadvantages not only for Greece but for whole the eurozone, said Chancellor Merkel.
“I refuse to imagine a eurozone without Greece, stated German President Joachim Gauck, in an interview to ZDF that will be shown later on Sunday.
The statement was posted on twitter by one of the journalists that interviewed Gauck.
There was progress but some issues are still open, said European Commissioner Pierre Moscovici after the end of the Eurogroup meeting in Brussels. Greece must be reformed and must remain in the eurozone, he added. Now, it relies on the country leaders to decide, he said.
The condition continues to be extremely complicated, Italian Prime Minister Matteo Renzi said upon his arrival to the EU Summit. We are closer now to an agreement. It is necessary a solution to be found for Greece.
French President Francois Hollande indirectly disapproved German Finance Minister Wolfgang Schaeuble’s proposal for temporary Grexit, upon his arrival to the EU Summit “There is no temporary Grexit. Either Greece will be in the eurozone or it will not be but if it is not then Europe will retreat and not proceed” he said.
For this reason, added Hollande, France will do whatever possible an agreement to be reach today and to keep Greece in the eurozone. Greece must proceed with the necessary reforms and then Europe will support it.
European Council President Donald Tusk cancelled a planned summit of all 28 European Union leaders that would have been needed in case of a Greek exit from the single currency, and said euro zone leaders would keep talking “until we conclude talks on Greece”.
Eurogroup finance ministers wrapped up a meeting broken off after nine hours of acrimonious debate on Saturday night without a firm recommendation on Greece’s application for a three-year loan on the basis of reform proposals Mr Tsipras sent on Thursday.
A Eurogroup document seen by Reuters said Greece must pass laws to change its value added tax and pension systems, reform bankruptcy rules and strengthen the independence of its statistics office before bailout talks can even begin.
Eurogroup chairman Jeroen Dijsselbloem said that while ministers had made good progress, a couple of big issues were left for the leaders to resolve.
“The Eurogroup… came to the conclusion that there is not yet the basis to start the negotiations on a new programme,” the document sent to national leaders said.
“Only subsequent to legal implementation of the above mentioned measures can negotiations on the memorandum of understanding commence, subject to national procedures having been completed,” it said, in a reference to authorisation by national parliaments in countries such as Germany.
The draft said Greece needed 7 billion euros by July 20, when it must make a crucial bond redemption to the European Central Bank, and a total of 12 billion euros by mid-August when another ECB payment falls due.
It did not say how those needs would be met, and EU officials said finance ministers had been unable to agree on emergency finance.
Several hardline countries voiced support for a German government paper that recommended Greece take a five-year “time-out” from the euro unless it accepted and implemented swiftly much tougher conditions, notably by locking state assets to be privatised in an independent trust to pay down debt.
But French President Francois Hollande, Greece’s strongest ally in the Eurozone, dismissed the notion, saying it would start a dangerous unravelling of EU integration.
“There is no such thing as temporary Grexit, there is only a Grexit or no Grexit. There is Greece in the Eurozone or Greece not in the Eurozone. But in that case it’s Europe that retreats and no longer progresses and I don’t want that,” he said.
Argument among finance ministers became so heated on Saturday evening that Dijsselbloem decided to adjourn at midnight and resume talks at 11 a.m. to allow tempers to cool.
The ministers agreed in principle to seek ways to make Greece’s debt burden manageable by extending loan maturities and other steps stopping short of a “haircut” or write-down, provided Athens first implements reforms.
At one stage in the debate on Greece’s debt sustainability, hardline German Finance Minister Wolfgang Schaeuble snapped at ECB President Mario Draghi, “I’m not stupid,” a person familiar with the exchange said. Mr Schaeuble also clashed with the head of the euro zone bailout fund, Klaus Regling, on whether Greece could afford to service its debt or not, another source said.
Greeks see humiliation
Greece’s new finance minister, Euclid Tsakalotos, was silent in public but the reaction among some lawmakers in Mr Tsipras’ radical leftist Syriza party, still smarting from having to swallow austerity measures they had opposed, was furious.
“What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the Tsipras government,” Dimitrios Papadimoulis, a Syriza member of the European Parliament, told Mega TV.
With banks shuttered for two weeks, cash withdrawals rationed and the economy on the edge of an abyss, some Greeks in the streets of Athens vented their anger on Ms Merkel and Mr Schaeuble.
“The only thing that I care about is not being humiliated by Schaeuble and the rest of theme” said Panagiotis Trikokglou, a 44-year-old private sector worker.
Greece has already had two bailouts worth 240 billion euros from euro zone countries and the International Monetary Fund, but its economy has shrunk by a quarter since the crisis began, unemployment has soared above 25 per cent and one in two young people is out of work.
Athens defaulted on an IMF loan repayment last month and faces state bankruptcy if it cannot make the bond redemption on July 20, which would likely force the ECB to cut emergency funding for Greek banks.
German sources said Mr Schaeuble, Merkel and Social Democratic Vice Chancellor Sigmar Gabriel had agreed on a division of labour to force Greece to accept tougher conditions or leave the currency area temporarily.
However economists said the idea of a temporary exit was likely to mean ejecting Athens from the European monetary union in the end.
Paul De Grauwe, a Belgian economist at the London School of Economics, compared it to a couple having a trial separation.
“Temporary Grexit is like temporary divorce. Most if not all end up being permanent,” he said in a Twitter message.
Ms Merkel requires the assent of the German parliament to agree to the opening of loan negotiations. Diplomats expected her to commit to calling a special session of the Bundestag to give her that mandate if Greece enacts prior reforms this week.
The United States has added its voice to calls for a deal this weekend, concerned at the geopolitical consequences if Greece were to be cut loose and become a failed state in the fragile southern Balkans, adjoining the Middle East.
“No one wants to see a North Korea in southeastern Europe,” a European Commission official said.
Russia says it is considering supplying energy directly to the government of Greece, where doubts have been raised about the ability of Greek state-run companies to pay for imports of oil and natural gas.
The state-run companies were ordered to put their reserves into a central account, which the state has been using to cover expenses such as salaries and pensions as liquidity ran out in the country.
Russian Energy Minister Alexander Novak said Sunday that Russia intended to support the recovery of the Greek economy by widening cooperation in the energy sector. In connection with this, he said Russia was studying options for direct supplies to the Greek government and hoped to reach an agreement in the next few weeks. Greece imports the vast majority of its gas from Russia.