German chancellor Angela Merkel has said she hoped to have sufficient reform proposals from Greece this week to be able to ask the German parliament to approve negotiations on a new long-term aid programme for Athens.
She said all 28 European Union leaders would meet next Sunday to discuss support for Greece provided Prime Minister Alexis Tsipras put forward detailed reform proposals along with a loan request by Thursday that were considered satisfactory.
She said she was “not exaggeratedly optimistic“ of a solution to rescue on Sunday but the summit had been called “because we think the situation is so dangerous“.
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Asked if Greece could crash out of the euro zone if it failed to put forward convincing reform proposals, she said Sunday‘s summit would decide whether to open negotiations on a two-year programme for Athens.
If a reform list was adequate and Greece took some prior actions to enact first measures, Ms Merkel said she was sure that short-term finance could be provided to help Athens over its immediate funding needs.
European Central Bank chief Mario Draghi assured euro zone leaders the ECB would do the necessary to keep Greek banks afloat until the weekend summit, Ms Merkel said.
Mr Tsipras won a commitment to seek a last-minute rescue at the emergency euro zone summit, before his country’s banks run out of money.
Ms Merkel, who arrived in Brussels saying there was still no basis for reopening negotiations with Athens, changed her tune in the room and was actively involved in efforts to find a last-ditch solution, euro zone sources said.
“It is not a matter of weeks but of a few days” to save Greece from collapse, Ms Merkel told reporters on arrival.
With Greek banks down to their last few days of cash and the European Central Bank tightening the noose on their funding, Mr Tsipras tried to convince the euro zone’s other 18 leaders to authorise a new loan swiftly.
People familiar with Greece’s financial system said the banks could start running out of money within two days unless there was an international rescue.
Ms Merkel and French president Francois Hollande worked together on a plan to save Greece from plunging into economic turmoil and possibly having to ditch the euro. This involved a medium-term conditional programme and a short-term interim financing deal for a few months, the sources said.
However, a solution still depends on Mr Tsipras putting forward convincing reform proposals and rushing key measures through parliament by the weekend to make Greece’s public finances sustainable.
If he does, bridge financing could be provided by “Greece’s friends” and by releasing past ECB profits on Greek bonds, to prevent Athens from missing a crucial €3.5 billion bond redemption to the ECB on July 20th, the sources said.
Some of Athens’ 18 partners in Europe’s common currency vented exasperation at five years of crisis wrangling with Greece. Lithuanian President Dalia Grybauskaite complained: “With the Greek government it is every time manana.”
Ms Merkel, under pressure in Germany to cut Greece loose, made clear it was up to Mr Tsipras to present convincing proposals after Athens spurned tax rises, spending cuts and pension and labour reforms that were on the table before its €240 billion bailout expired last week.
Euro zone finance ministers earlier complained that their new Greek colleague Euclid Tsakalotos, while more courteous than his abrasive predecessor Yanis Varoufakis, had brought no new proposals to a preparatory meeting before the summit.
“I have the strong impression there were 18 ... ministers of finance who felt the urgency of the situation and there is one ... who doesn’t feel the urgency of the situation,” Belgian Finance Minister Johan Van Overtveldt said.
Greek officials said the leftist government broadly repeated a reform plan Mr Tsipras sent to the euro zone last week before Greek voters, in a referendum on Sunday, overwhelmingly rejected the austerity terms previously on offer for a bailout.
