Eurozone sets Greece tough terms as euro exit looms

(L-R) French President Francois Hollande, European Commission President Jean-Claude Juncker and Greek PM Alexis Tsipras confer prior to the start of a Eurozone summit in Brussel on July 12, 2015. (AFP Photo/John MacDougall)
Eurozone leaders set Greece brutal take-it-or-leave-it conditions for a desperately needed bailout deal at a summit on Sunday as an exit from the single currency loomed ever larger.
Hawkish Germany pushed for a Greek "time out" from the euro if leftist Prime Minister Alexis Tsipras fails to agree terms for a three-year rescue plan worth up to 86 billion euros ($96 billion).
Athens faces demands to push through new reform laws next week to win a third bailout since 2010, with the government in a tight corner as the cash-starved country\’s banks look set to run dry in days.
"There will be no agreement at any price," Merkel said as she arrived for the summit of 19 eurozone leaders, complaining of a loss of trust in Athens and warning of "tough negotiations" ahead.
Tsipras, who was elected on an anti-austerity platform in January, insisted a deal was possible on Sunday "if all parties want it" and added that he was ready for an "honest compromise".
The tensions were underscored when EU President Donald Tusk halted the summit midway for three-way talks between Tsipras, Merkel and French President Francois Hollande.
The summit came after the Eurogroup of eurozone finance ministers finished two days of intense talks on Greece\’s reform proposals. The Greek parliament approved the plans on Saturday, despite them being similar to those rejected by Greeks in a controversial referendum on July 5.
Greece would now have to push through new laws by Wednesday under the conditions agreed by the eurozone ministers and to be considered by the leaders of the bloc, Finnish Finance Minister Alex Stubb said afterwards.
Athens would also have to introduce tough conditions on labour reform and pensions, VAT and taxes, and measures on privatisation, he said.
The Eurogroup even proposed a temporary Greek exit from the euro, a move first floated by Germany, which some observers said was a thinly disguised way of pushing Athens out of the single currency softly.
"In case no agreement could be reached, Greece should be offered swift negotiations on a time-out from the euro area, with possible debt restructuring," said the document obtained by AFP. The passage was in brackets to indicate it was not unanimously approved and needs the approval of leaders.
Other measures include letting the "troika" of creditors back on the ground in Athens after they were expelled by Tsipras\’s government, and getting creditors\’ approval for any legislation affecting issue covered by the bailout.
The crisis has exposed tensions between the eurozone\’s two biggest powers with pro-austerity Germany going head to head with France, which has been the country most supportive of Greece during the crisis.
Hollande said Paris would do "everything" to keep Greece in the euro and ruled out the "temporary Grexit" proposal.
An emergency summit of all 28 EU leaders on Sunday — billed by Tusk last week as the final deadline to keep the country in the euro — was called off at the last minute due to slow progress.
Five years have elapsed since the Greek debt drama began, but the latest instalment has opened deeper than ever rifts in the European single currency, the heart of the post-war dream of a politically unified Europe.
In Greece, there is growing alarm at capital controls that have closed banks and rationed cash at ATMs for nearly two weeks, leading to fears that food and medicine will soon run short.
"We don\’t sleep, everybody\’s worried," a Greek pensioner said, watching with concern the events taking place in Brussels several thousand kilometres (miles) away.
The European Central Bank is providing emergency liquidity to keep Greek banks afloat but has frozen the limit, with fears that failure to reach a deal could cause it to shut off the taps completely.
ECB chief Mario Draghi has also found himself at the centre of the storm, with German Finance Minister Wolfgang Schaeuble reportedly snapping "don\’t take me for a fool" at him on Saturday.
Greece\’s debt is now worth nearly 180 percent of the country\’s GDP and on June 30 it became the first advanced economy to default on a payment to the International Monetary Fund.
Tsipras was elected in January on a vow to end five years of bitter austerity under two bailouts since 2010 worth 240 billion euros.
But fears are mounting that the results of Friday\’s parliamentary vote in Athens could have critically weakened the Greek government\’s ability to quickly legislate on the reforms as demanded by the eurozone.
Tsipras won the backing of 251 out of 300 deputies in the Greek parliament for his reform plans, but three senior government figures were among 10 MPs who abstained or voted against.
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