Merkel, Hollande, and Tsipras confer prior to the start of a summit of Eurozone heads of state in Brussels. The EU cancelled a full 28-nation summit to decide whether Greece stays in the European single currency as a divided eurozone struggled to reach a reform-for-bailout deal.

AFP/Reuters
Brussels

Divided eurozone leaders clashed over the fate of Greece yesterday with a catastrophic exit from the single currency looming large as they struggled to reach a bailout deal with debt-hit Athens.
Germany’s fiscal hawks faced off against doves led by France at a summit of the 19 eurozone leaders in Brussels, with Athens facing demands to push through new reform laws next week.
Caught between the rock of throwing good taxpayers’ money after bad in Greece and the hard place of opening a dangerous crack in their common currency, tempers are fraying among eurozone ministers.
So heated did arguments become after nine hours of their sixth emergency council in three weeks that the chairman called a surprise halt just before midnight on Saturday in the hope talks which resumed yesterday could proceed with clearer heads.
“It was crazy, a kindergarten,” said a source familiar with the arguments in the Eurogroup among increasingly weary finance ministers. “Bad emotions have completely taken over.”
Unlike many of a dozen previous meetings they have had since Greeks despairing of creditor-imposed austerity elected leftist Prime Minister Alexis Tsipras in January, some of the sharpest exchanges were not with their Greek colleague but each other.
By contrast, Greek Finance Euclid Tsakalotos, appointed last week in place of the often provocative Yanis Varoufakis, seemed calm and expressed a willingness to take steps to convince creditors Athens could be trusted to implement budget and economic reform measures to unlock tens of billions of euros.
Another official close to the talks said the adjournment was prompted by a particularly heated exchange – on Greece’s ability to service its debts – between European Central Bank (ECB) chief Mario Draghi and German Finance Minister Wolfgang Schaeuble.
In response to Draghi, one participant quoted Schaeuble as saying: “I’m not stupid.”
The veteran German conservative leads a hardline faction in the talks which warns Greece that it faces ejection from the 19-country eurozone if it does not do much more to earn its third bailout in five years.
Despite the fact that Greece’s banks could run dry soon, an emergency summit of all 28 EU leaders billed as the last chance to keep the country in the euro was called off due to slow progress.
Tsipras insisted a deal was possible last night “if all parties want it”, adding that he was ready for an “honest compromise”.
But German Chancellor Angela Merkel took a tough line as usual, echoing her usual position and that of several mainly newer eastern European euro members.
“There will be no agreement at any price,” Merkel told reporters, complaining of a loss of trust in Athens and warning of “tough negotiations” ahead.
French President Francois Hollande, whose country has been the most supportive of Athens during the six-month stand-off, meanwhile said that Paris would do “everything” to keep Greece in the euro.
In a sign of the growing tensions between the eurozone’s two biggest economies and political forces, Hollande also ruled out a German proposal for a “temporary Grexit” from the single currency.
The meeting came after the Eurogroup of eurozone finance ministers finished two days of intense talks on Greece’s proposals for reforms in exchange for a three-year bailout worth €80bn ($89bn).
They agreed Greece would have to push through new laws by Wednesday under the conditions agreed by the eurozone ministers, 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.
“We have come a long way but a couple of big issues are still open,” Eurogroup chief Jeroen Dijsselbloem said. “We are going to put those to the leaders so it’s up to them.”
Greece and its creditors have been at odds since Tsipras was elected in January on a vow to end five years of bitter austerity under two bailouts since 2010 worth €240bn.
Tension turned to anger last month after Tsipras called a referendum on the bailout terms, in which Greeks overwhelmingly rejected the creditors’ demands.
Greece’s parliament approved fresh proposals by the government in Athens in the early hours of Saturday, despite the fact they were largely similar to many of those rejected in the referendum.
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.
Economy Minister Giorgos Stathakis warned the restrictions will likely stay in place for “months” even if there is a deal.
Greek newspapers expressed alarm, with the headline of the Eleftheros Typos in Athens saying: “The future of Greece on a razor’s edge” and asking “what will happen in the case of the nightmare of a Grexit?”
The ECB 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.
Fears are mounting meanwhile 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, even though they are similar to the ones that Greeks rejected in last week’s referendum.
But three senior government figures were among 10 MPs who abstained or voted against, and several others from the ruling leftist Syriza party stayed away, prompting commentators to predict a government shake-up.
Greece’s debt is now worth nearly 180% 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 (IMF).
France, which along with the European Commission and ECB is warier than many in Germany of allowing a “Grexit” that could undermine faith in the entire currency, has worked with Greek officials to shape their proposals.
With Italy, France shares concerns about Greek promises but is concerned Germany, or at least Schaeuble, is too inflexible, eurozone sources said.
One said that after months of frustration with their former Greek counterpart, some ministers were impatient with Schaeuble.
“He’s switched roles with Varoufakis,” the source said.
A Greek official said he feared some in the room had made up their minds to force Athens out of the eurozone.
“Schaeuble’s positions are irresponsible and can bring disaster,” said Gianni Pittella, an ally of Italian Prime Minister Matteo Renzi. Leader of the centre-left bloc in the European Parliament, Pittella spoke at a meeting in Brussels.
That reflects something of a left-right split across Europe.
Hollande’s Socialist party issued a comradely appeal to Sigmar Gabriel, the German Social Democrat leader who sits as deputy to conservative Chancellor Angela Merkel in a coalition.
It said: “The peoples of Europe do not understand the increasingly hardline position taken by Germany.”
Gabriel, also in Brussels, said he aimed to keep Greece in the euro and stressed that France and Germany, traditionally the twin motors of European integration, would work together.
Schaeuble is far from alone in demanding more from Greece and a draft Eurogroup statement, to be passed to Merkel and the other leaders meeting later for endorsement, spells out a long list of measures Athens must take straight away.
With its Eurosceptic coalition allies furiously opposed to giving more cash to Greece, the new Finnish government is also pressing for more.
Poor, ex-communist states in the east are also finding it hard to justify to their voters why they should pitch in more money for Greeks who are better off than they are.
And in a reflection of annoyance among other states that imposed painful austerity in exchange for help, the Portuguese minister told Tsakalotos that the third bailout he was seeking – possibly over €80bn – was bigger than the only one given to Portugal, a source familiar with the talks said.
A nation of similar size, Portugal received a €78bn bailout in 2011.Greece has already had €240bn.
There are also divisions among governments, reflecting the stakes and difficulty of the dilemma.
“The rift in this question runs right through Europe,” Austrian Chancellor Werner Faymann said. “The German finance minister seriously wants to push Greece out of the euro; the German chancellor, on the other hand, is very anxious to find a constructive solution. And it’s like that in many countries.”
And for many of those involved, what is a stake is not money but whether shared aspirations for European unity are better served by applying rules strictly or bending them if need be.
As ministers haggled, Martin Selmayr, the German chief-of-staff to EU Commission head Jean-Claude Juncker, found time to tweet a link to a German TV sketch entitled Our Precious German Euros.
Two friends work up a frenzy repeating to each other recent media comments about lazy Greeks and thrifty Germans.
The joke is on them. “Something’s at stake that we don’t talk about any more,” runs the satirist’s punchline. “Europe.”