ATHENS — Bitterly divided European officials were trying to salvage hopes Sunday of averting an imminent financial collapse in Greece, squaring off in a fresh round of talks over how or whether to give this Mediterranean nation its third bailout in five years.
The meeting set up a day that could rapidly define the future of the world’s most ambitious currency union, the euro. Meeting in Brussels, finance ministers from the 19 nations of the euro zone were unable to come together during a marathon round of talks that broke off in the early morning, exposing the deep fault lines that have developed in recent days over rescuing Greece and the price other nations must pay to allow it to stay in the euro.
They reconvened at midday, attempting to find a compromise ahead of a planned summit of European leaders. Initially, all 28 leaders of the European Union were scheduled to meet. But the gathering was pared down to only the heads of state from countries that share the common currency, underscoring the need to find consensus within those countries, many of which still displayed a profound distrust in the government in Athens.
European Council President Donald Tusk vowed that the summit would not stop until a decision was made.
There was a growing sense of urgency, with Greece facing the risk of a quick banking collapse and an unprecedented exit from the euro zone. The crisis also threatens European unity more generally, as a handful of hard-line creditor nations, including Germany and Finland, block any rush toward a deal.
The resistance set up a political struggle between nations anxious to aid Greece and countries that appeared to want to make an example of it. Those still reluctant remained skeptical of the sudden about face in the far-left government of Greek Prime Minister Alexis Tsipras, who only a week ago campaigned against a cash-for-cuts deal with Europe.
Several finance ministers said they wanted Greece to enact its proposed austerity measures before handing over more money to the debt-laden country.
“What we want is a deeply reformed Greece inside the euro zone,” said Pierre Moscovici, head of economic affairs at the European Commission.
If finance ministers find no compromise, it will fall to euro zone heads of state, who will meet either way, to break the impasse. One Greek official with direct knowledge of the talks said that Finland was emerging as the single-toughest holdout against a deal. With the Greek issue becoming a political land mine for the government in Helsinki, Finland appeared so set against an agreement that securing one might require the invocation of emergency procedures to override its possible veto.
Before the start of the new round of talks Sunday, Finnish Finance Minister Alexander Stubb insisted his nation was “not trying to block a deal,” but rather was demanding “very tough conditionality” before agreeing to anything.
“I’m still hopeful but I think we’re very far away from the type of conditionality we need,” Stubb said. He added, “if this was a negotiation between 1 to 10, we are still standing around 3 or 4.”
The Greek debt crisis is a half-decade-old leftover of the global credit bubble that burst in the late 2000s, puncturing subprime loans in the United States and national debt in a number of vulnerable European nations. In Greece’s case, years of government over borrowing, coupled with rampant tax evasion and a bloated public sector, sent the nation into a financial spiral that prompted two earlier bailouts.
Yet those bailouts came with tough conditions of austerity that plunged Greece into a historic depression. The coalition government that rode to power here in January did so on a backlash against such measures.
Now, Tsipras is pledging to make billions of euros worth of cuts and overhauls to secure such a deal, despite a resounding rejection of more austerity in the national referendum he called last week.
“We are not ready to accept calculations that are not believable,” German Finance Minister Wolfgang Schäuble told reporters on Saturday in Brussels. “We cannot only rely on promises. Trust has been destroyed over the past months in an incredible manner.”
Other resistant European finance ministers appeared willing to back a deal, but only under stricter conditions. They sought evidence that Greece was committed to enacting the roughly 13 billion euros in spending cuts and tax increases that it proposed in a bailout request Thursday, and some wanted Athens to pass legislation by Wednesday that set in stone the cuts and revisions, according to a member of the Greek delegation in Brussels who spoke on the condition of anonymity to discuss the negotiations.
About 10 countries demanded tougher austerity measures, according to the Greek delegation member. A separate government official in Athens estimated the amount could total an additional 1 billion euros in spending cuts and tax increases, although the negotiations remain fluid.
Hard-liners, the official said, were also calling for strong oversight of Athens by Greece’s troika of creditors, as it is known: the European Union, the International Monetary Fund and the European Central Bank.
Athens had requested a bailout package of 53.5 billion euros that would carry it through the next three years. But there was a growing recognition among European officials that much more could be needed after two weeks of stringent capital controls have choked Greece’s economy. Estimates for the price tag ranged north of 70 billion euros.
Greek officials suggested they were willing to enact fresh austerity measures by the new Wednesday deadline. Athens, however, first wanted to weigh the outcome of Sunday’s summit of European heads of state before committing to a vote.
The country also hoped to secure a promise from creditors to restructure Greece’s crippling debt, which has ballooned to roughly 175 percent of the size of its economy. Many officials believe that is the only way to end Athen’s cycle of financial crises. Along with the budget reductions, Tsipras requested that Europe consider “regulation of debt.”
“I hope we are nearing the end of a battle,” he said before Parliament on Saturday. “Sooner or later, this seed of dignity and democracy will bear fruit for other Europeans.”
But debt relief will likely be another road block in discussion on Sunday. German Chancellor Angela Merkel said recently that she opposed a “classical haircut” of Greek debt — seemingly opening the door to more creative ways to reduce the burden on Greece. German Finance Ministry spokesman Martin Jäger said acknowledged last week a debt restructuring that eases Greece’s terms could be palatable, saying the intent was not to “significantly reduce the cash value of the debt.”
Greece had hoped that successful talks this weekend would pave the way for emergency funding through the European Central Bank. The ECB has allowed Greece’s nearly bankrupt banks access to an 89 billion euro lifeline and must approve an extension Monday.
The money has been just enough to keep Greece’s financial system alive, but only because banks have been closed since June 29 and ATM withdrawals limited to 60 euros per day.
Without a fresh infusion of cash, however, Greek bank officials have warned that they may need to curb withdrawals even further. Such a scenario could also trigger a series of rapid bank failures here and potentially prompt a fast exit of Greece from the euro.
“We don’t have the luxury of time,” said Thanos Dokos, director of the Hellenic Foundation for European and Foreign Policy, a think tank in Athens. “There will have to be a quick decision showing which way the wind is blowing. The Greek economy is slowly dying.”
European finance ministers must reach an unanimous agreement in order to move forward with negotiations over Greece’s bailout package, according to official protocol. But an obscure loophole could allow the group to support a deal with only 85 percent approval. However, a Greek official said the IMF, which must also back a deal, was insisting on full European unity to support a rescue package.
Some nations, such as France, were strongly backing a deal and seeking to overcome resistance. According to Sky News, the Slovakian finance minister, Peter Kazimir, was asked whether the outcome “was a yes or a no” after the meeting broke up. “No is the better answer,” he replied.
In a sign of how deep the divisions went, German media reported Saturday that Schäuble had drawn up a proposal in which Greece would leave the euro zone — though only temporarily. Alternatively, he proposed that Greece “transfer assets” worth at least 50 billion euros to European entities as collateral for its bailout — a humiliating option that might require the sale of national monuments, even Greek islands.
However, the proposal appeared to be an internal document and was never formally presented as an option Saturday, according to meeting participants.
But in a post on Facebook, Sigmar Gabriel, the German vice chancellor, said his party knew about Schäuble’s proposal, calling it “feasible” only if Greece decided that was the best option.