Updated at 9:20 p.m. ET to include possible request of week extension by Greece
The future of Greece's economy as well as the future of the euro currency hung in the balance on Sunday, but the denouement of a hard weekend was unsatisfying as the beleaguered country came away with an even harsher bailout deal and no hope of relief until at least Wednesday.
The political leaders of Europe convened for a crucial meeting to negotiate a deal for Greece to receive much needed cash and, by extension, keep the eurozone together. But Germany, and in particular its finance minister Wolfgang Schauble, threw a spanner in the works by including the possibility that Greece could exit the euro.
While the official document called the possibility of a Greek exit a "time out," it would be more likely permanent, since there is no legal mechanism for any country to leave the euro permanently or temporarily.
Sunday's meeting is the culmination of a months-long saga that has had many twists and turns, including some dramatic ones in just the past week. Last Sunday, Greeks voted to reject Europe's stringent bailout terms -- including spending cuts -- only to see their prime minister propose a new plan that very closely mirrored the one that had been voted down. That introduction of that proposal sparked optimism that the Europe and Greece had found middle ground.
[seealso slug=http://sale-online.click/2015/07/12/greece-grexit-bailout-eu/%5D%3C/p%3E%3Cp%3EFew details have emerged from the meeting thus far, but one break did allow for Tsipras, Merkel and Francois Hollande, president of France, to talk on the side. Things, according to reports, did not go particularly well.
#greece merkel/holland session with tsipras said to resemble 'extensive mental waterboarding' - top official— Ian Traynor (@traynorbrussels) July 12, 2015
Arriving at the meeting, Greece Prime Minister Alexis Tsipras struck an optimistic but guarded tone about the talks.
"I'm here ready for an honest compromise. We owe that to the peoples of Europe who want Europe united and not divided," he said. "We can reach an agreement tonight if all parties want it."
That sunny outlook was short lived. The finance ministers of various European countries came out publicly against Greece's plan, and a Saturday meeting between them that was supposed to set the table for Sunday ended earlier than expected with no apparent progress. German Finance Minister Wolfgang Schauble has been among the most strident in his opposition to Greece's plan, even sketching out a way for Greece to leave the EU for five years -- an idea being called a "time out."
Schauble has adamantly rejected Greece's plan and questioned whether the country would follow throw on any promised reforms.
“We are not ready to accept calculations that are not believable,” Schauble said on Saturday. “We cannot only rely on promises. Trust has been destroyed over the past months in an incredible manner.”
Schauble reportedly floated a "temporary Grexit" plan that would see Greece leave the euro for five years with humanitarian support. The plan was widely criticized by economic commentators and analysts, including those at Deutsche Bank who were skeptical of Schauble's "paternalistic approach" to Europe.
That idea has been opposed by others in Europe that want to keep Greece in the euro, most notably France. Hollande has been publicly adamant about this stance.
Pres Hollande says no temporary exit for Greece. 'There is Greece in the eurozone or not in the eurozone but in that case Europe retreats.'— Gavin Hewitt (@BBCGavinHewitt) July 12, 2015
Greece is deep in debt and broke, with less than 32 euros per person in its banks and no hope of more euros on the way. With large debt payments soon due -- including a $518 million payment due to the International Monetary Fund on July 13 and $3.9 billion due to the European Central Bank on July 20 -- the country is in desperate need of loans from Europe's financial institutions that will keep the country afloat. Greece has already missed a $1.8 billion payment that was due to the IMF on June 30.
As of late Sunday night and into the early hours of Monday, it seemed like the final decision might be pushed back yet another week.
#Greece says can't pass legal system reforms & rules for dealing w/ bank failures by July 15, asks for week extension http://t.co/84fEtKhPj6— Tara Palmeri (@tarapalmeri) July 12, 2015
If an agreement is reached, it would be Greece's third major bailout since 2010.
Greeks losing faith
As Greek and European leaders duke it out in Brussels over the details of Greek Prime Minister Alexis Tsipras' latest bailout plan, Greeks back home seemed to have lost hope that anything good would come out of today's meetings.
In Athens' graffiti-covered Exarchia district, known as a left-leaning center for youth rebellion and anarchy, 23-year-old Tasos switched between anger and resignation when asked his thoughts on the weekend's negotiations so far.
"The Eurogroup needs to take responsibility for Greece, Italy and Spain and all the other southern European countries that it destroyed," said Tasos, who like many young people in the neighborhood would share only his first name. "Germany's aggression right now will backfire. I think they're going to kick us out of the euro and Greece will need to go to...another currency. The banks will collapse. And then our lives will be shit for a year and everything get really cheap. And next year everyone's going to come to Greece on vacation because it's so cheap, and we will recover."
Tasos, who works as a waiter in a restaurant, likened the eurozone leaders to "monsters who are eating each other."
The streets in this district are still filled with posters proclaiming "Oxi," the Greek word for "no." Not a "yes" poster is to be found.
Asked her thoughts on the negotiations so far, another young woman in Exarchia shrugged and said simply: "It's a mess."
Greece is looking for more than just loans
Greece is seeking about $82.5 billion in loans in the next two years from the European Stability Mechanism, which was formed to provide aid in case of economic difficulties in the EU. It also asked for additional money to help its struggling banks.
In return for that cash, Europe's leaders have been demanding that Greece take a series of budget cuts, tax hikes and other changes such as raising the retirement age that have become widely known as "austerity measures." These reforms include cuts to pensions drawn by retired Greeks and the hike of the value-added tax -- similar to a sales tax -- to 23%.
Greece is also looking for more than just more loans. The country and many of its supporters having been calling for debt relief that would forgive Greece of some of the money it owes. This has been a controversial element, with European hardliners opposing such a move while Greek supporters and economic analysts arguing it is the only way to put Greece's economy back on a sustainable path.
Yanis Varoufakis, who had until recently served as Greece's finance minister, penned a column for the Guardian decrying the EU's lack of willingness to offer Greece debt relief.
"Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure?" Varoufakis wrote. "The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics."
Varoufakis has also shared a pre-publication summary of a column due to be published later this week in German newspaper Die Zeit.
Varoufakis weighing in. pic.twitter.com/XJEzgS5yOd— Duncan Robinson (@duncanrobinson) July 12, 2015
Austerity terms had proven to be a sticking point, with Greece resisting many of the demands until recently. On Thursday, Greek Prime Minister Alexis Tsipras made a u-turn, offering a proposal that was very close to the one that Greece rejected in its referendum vote. The Greek parliament later passed Tsipras's proposal. However, the Greek government's capitulation may have come too late.
If Greece is forced to leave the euro, there is no way to know exactly what will happen. There is no mechanism for a country leaving the euro, reflecting the belief that inclusion was permanent. So far, Schauble's proposal of a temporary exit is the only idea that has been floated publicly.
If the two sides cannot come to an agreement, Greece would almost certainly end up in official default due to its inability to pay its debts, an event that could damage the country's already struggling economy.
The "temporary Grexit"
Schauble has proposed creating a humanitarian aid package for Greece if it ends up going with the "time out" plan. Greece would seem to have few options other than to begin printing its own currency, a move that would mean it had effectively abandoned the euro as its currency. This would be the first time a country converted away from the euro since its introduction in the early 2000s.
European "hardliners" -- those who are pushing Greece to be more aggressive with their economic measures -- have made new requests, including the sale of almost $56 billion of the country's assets that would be managed by an outside company.
Other European leaders have called for Greece to take action to prove that it is serious about instituting the reforms.
Eurozone official says hardline countries want to wait until Wednesday to see #greece pass reforms in Parliament before deal— AnneSylvaineChassany (@ChassNews) July 12, 2015
The day's events will have massive political ramifications in Greece, where Tsipras and the ruling Syriza party looks to be in trouble. Syriza is Greece's far left party that came to power in early 2015 after running on a platform to reject Europe's stringent reform measures.
If eurozone governments force regime change on Greece as price of rescue, euro risks being seen as antipathetic to democracy #GreeceCrisis— Robert Peston (@Peston) July 12, 2015
At this point, "solidarity" to Greece means giving it a deal that Greeks have rejected and will most likely end Syriza. Hope that's clear.— Zoe Mavroudi (@zoemavroudi) July 12, 2015
Some finance ministers sought to downplay the possibility of a Greek exit from the euro despite Schauble's proposal and the lack of time to get a deal done.
#Austrian FinMin: #Greek #Exit from Eurozone Currently Off the Table #Greece— Nektaria Stamouli (@nstamouli) July 12, 2015
However, Schauble's idea of a time out seemed to have gained some traction, as it was included in a document produced by the eurogroup of finance ministers.
Here, in black & white, is key par from eurogroup document today: Greece cld be offered “time-out from the euro area” pic.twitter.com/A6BOCPslE5— Ed Conway (@EdConwaySky) July 12, 2015